Naturally, any investor hopes for high returns on their investments. However, achieving those high returns can often involve setting aside one’s usual tolerance for risk and making a move which could pay off big or could result in big consequences. Conversely, managing your risk may mean making investments that will provide a lower return but will also provide you with a sense of stability and steadiness helpful for building a secure future.
But making money as an investor doesn’t necessarily have to involve major risk-taking. What’s needed is a balance between the desire for high returns and the need for safe portfolio diversification and risk management.
To achieve such a balance, consider the following advice from the financial and investment experts of Kiplinger Advisor Collective. Below, they offer up their best tips for making money while maintaining a strategy that helps you avoid unnecessary risks.
Start with meeting your basic needs
“Seeking the highest returns can give you an adrenaline rush when things go right, but the feeling is usually short-lived. Diversification in a portfolio, however ‘boring’ it seems, provides much more predictable returns over time. Meet your basic standard of living needs for the future with a well-diversified portfolio. Once that's set, some opportunistic investing might boost your desired outcome.” — Chris Alman, Equip Financial Partners
Equip yourself with the right tools and systems
“Set yourself up well in the beginning. Be sure that you have the right tools and a trusted portfolio management system. In addition, always fully understand what's in the terms or contract — especially the fine print — so you are never caught off guard. By having a solid plan and success setup, you can help to minimize your risk in the long term while creating a steady return.” — Justin Donald, Lifestyle Investor
Outline a savings and investment plan
“I think it is important to understand the importance of having a savings and investment plan. Savings provide liquidity for any emergencies and opportunities. Investments can, and often do, fluctuate in the short term, but they offer the potential for capital appreciation greater than inflation over longer time horizons.” — Marguerita Cheng, Blue Ocean Global Wealth
Kiplinger Advisor Collective is the premier criteria-based professional organization for personal finance advisors, managers, and executives. Learn more >
Keep a portion of your portfolio in cash
“Keep a consistent portion of your portfolio (or liquid assets, if you prefer to think of it that way) in cash. Specifically, keep it in a high-yield savings account that's insured by the Federal Deposit Insurance Corp. (FDIC), rather than in a time deposit — such as a certificate of deposit (CD) — that may have withdrawal penalties. This is much less painful to do these days, with interest rates higher than they've been in 15 years.” — Andrew Schrage, Money Crashers LLC
Consider investing in real estate
“A well-diversified portfolio doesn’t have to mean settling for mediocre returns. Portfolio diversification can help drive performance. Real estate is an often-overlooked option for investors, yet it offers opportunity for overall portfolio diversification and may provide potential for lucrative returns. New innovations in crowdfunding and tech have made commercial real estate investing accessible to more investors.” — Tore Steen, CrowdStreet, Inc.
Place calculated bets on high-returning opportunities
“A traditional, 60/40, plain vanilla portfolio of index funds is effective but, in light of projected life expectancy increasing at its fastest clip in human history, there's a real risk it falls short. To manage longevity risk, placing calculated bets on higher-returning opportunities is essential. In practice, this may translate to 5% to 20% of assets being earmarked for ‘moonshot’ opportunities.” — Dennis McNamara, wHealth Advisors
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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