While developing an investment strategy it is necessary that you have the proper mix of securities and assets in your investment portfolio. This will determine your return and risk exposure. As well there are some other factors that will have an impact on your portfolio. If you want to be successful, then these factors have to be kept in mind:
– Before you start investing, you have to understand your tolerance to risk. You have to make sure that you are not taking on more risk than comfort level allows.
– You have to match your targets with your strategy. You have to take into account that different targets will have different time frames. Probably, it is not a good idea to use long term investment when you have short term target.
– You have to remember that your emotions can work against you. Even though you have determined the risk level you feel comfortable with the money in the investment portfolio is yours and if markets decline you could make a rash decision and take your funds out at the wrong time. If you cannot sit out the dips in the market, then services of financial planner can be helpful for you.
– It is not a good idea to re-balance your portfolio quite often. When you invest, you are taking a long term view and the risks in long term investments are not as volatile as in short term ones. When you re-balance quite often, you are taking a short term view into your portfolio.
– This is a good idea to set up an emergency fund outside of your investment portfolio to cater for the urgent and unexpected needs. In that way you will not have a need to take money from your investment if an emergency should arise.
In fact, creating an investment strategy is more than just putting your money into various asset classes. If you manage to keep the above mentioned things in mind, you will be on your way to have a successful investment portfolio.
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