Sunday, October 12, 2014, AM | Leave Comment
In order to set yourself free from daily and weekly worries, experts suggest to invest for the long haul in recessionary as well as booming economies. Dramatic rises in the markets result in profits and excitement. Declines often follow which create fear and anxiety. There is no magic wand with which you can crisis-proof your investments.
Following the below four steps can minimize the risk of losing all during the decline of the markets.
Select long-term funds
First and foremost, always think in terms of long-term investments. To be free from daily worries, pick funds that are solid long-term performers.
I personally research a fund – for example an equity fund – and select one that has a good and consistent return, if not the highest, over a period of at least 5 years.
Determine the right mix of stocks and bonds
For your long-term goals, you must invest some of your money in stocks. You should also hold bonds in your portfolio so you are not totally at the mercy of the stock market’s swings.
Short-term income investments, such as money-market funds or bank savings accounts, have no place in long-term investment portfolio.
The younger you are, the more you’d want to invest in stock funds and less in bond funds. When you’re young and just starting out in job market, think long term and invest more in stock funds, probably at least 80% of your total investment in stocks.
Choose the right types of stocks and bonds
Instead of trying to select the best performing investments, allocate your money appropriately among the various investment categories. Experts suggest to invest in a range of mutual funds.
Avoid risky approach. Don’t commit too much money to just one sector fund. Diversify among different funds but different sectors as well.
As far as bonds are concerned, divide your holdings equally between long- and short-term funds that invest in corporate, municipal and U.S. government bonds.
Periodically rebalance your portfolio
Take an active role in rebuilding your portfolio. Changes in the financial markets can have a big impact on your portfolio and possibly leave you holding the wrong mix of investments in your portfolio.
More importantly, if you have to make a major change in your portfolio, do it gradually.
In a Nutshell
Depending on your age and income, follow these steps to prioritize your investment portfolio.