We all want to see better returns on our investments.
Whether you are building an income portfolio and want to, eventually, make it work for you in terms of viable revenue, or whether you are just hoping for decent returns for the long-term, what you do now can make a difference later.
If you want to see better investment returns, here are some things to keep in mind to boost returns over time:
1. Don’t Give in to Knee Jerk Reactions
One of the worst things you can do for your investment portfolio is to give in to knee jerk reactions.
It’s easy to let panic drive you into abandoning some part of your investment strategy. However, this can be a terrible idea.
When you have a knee jerk reaction, you make choices without thinking them through, and blind response like that is a good way to ruin your portfolio. Instead, stop and think about the situation. Think about the investment, and what you want to have happen. Look at the fundamentals, and think things through. If nothing’s changed with the fundamentals, chances are that there is no reason to panic and sell on a knee jerk reaction.
2. Look for Good Value
Next, look for investments that offer good value.
Look at valuations, and pay attention to how likely it is that your investment choices will grow in the future. Finding investments that are undervalued, so that you can buy low, can be difficult work and mean a great deal of time spent.
However, if you aren’t going to do the index thing, and you are going to focus on individual investments, you need to learn about identifying value.
Take the time to learn about P/E ratios, and to learn how to read a balance sheet. Get a good feel about what constitutes value in an investment, and look for investments that are priced lower than they should be.
3. Minimize Your Fees
You might be surprised at how much your investing fees can cut into your real returns over time. If you want to boost your investment returns over time, pay attention to the fees you are paying.
There are a number of fees out there, from transaction fees to those fees charged by funds.
Look for ways to trade for less, and stay away from funds that come with high fees. If you want to invest in funds, consider index funds and ETFs. These have lower costs, and you are more likely to see reasonable results.
By watching the fees you pay, you’ll keep more of your money, and it will be more effective over the long term.
4. Keep the Long View in Mind
One of the reasons that investors fail so miserably is that they don’t take the long view. It can be difficult to take the long view in some cases, especially since you might be worried about what is happening this week, or next month.
During the short term, most investments are choppy. You can see the volatility, and it can make you nervous about your investing strategy, and the choices you are making.
Instead of focusing on the short term, look to the long term. Over time, trend lines tend to smooth out.
Consider this, and remember that your investing plan is meant to provide you with returns over a longer period of time.
5. Consider Taxes
One of life’s realities is taxes.
You will have to pay taxes, and that can eat into your overall returns. You don’t want to do anything illegal, but there are ways to arrange your situation so that you reduce your tax liability when you decide to sell your investments, or when you shift into income mode.
Think about the future, and your likely tax bill. You can make decisions to harvest tax losses and offset other income, or you can look for other ways to reduce your tax bill.
One of the best ways to do this is to used tax advantaged accounts. Retirement accounts and other tax advantaged accounts can provide you with a way to build wealth while reducing the tax impact.
Look at your situation, and consider your investments. With a little planning, you can boost your returns over time, without taking on unnecessary risk.