Every time you invest, there is a degree of risk. You may have assessed the figures, found something that you believe has potential and invested funds into it. Whether it pays off in the way you hope is not guaranteed, and you could find the value of your investment fall rather than rise.
To maximise returns, you must finesse a strategy, and optimise your opportunities. Effective strategies deliver results that can accelerate growth, and if you are new to investing or have had a run of bad luck, perhaps you need to refine your approach.
We look at seven ways you can accelerate the growth of your investments.
1. Diversification: Spread your risk for a balanced reward
When you diversify, you put your money into different assets, and this for many, is a fundamental way of seeing your investments grow. By investing in funds that have a focus on bonds, stocks, real estate and commodities, you spread the risk and, as a result, reduce the impact a volatile market will have on your cash. Investors prefer to diversify as if one area of investment is struggling and performing poorly, the opportunity for gains in other areas of investment can cover or exceed the losses found in the weaker sector.
2. Regular contributions
Ensuring you regularly top up your investments can see substantial results when done correctly. Whether you choose to do that monthly, bi-monthly or quarterly, it still stands to deliver. Often referred to as dollar-cost averaging, utilising this strategy allows you to buy more shares when the prices are low and less when they get too high. Over time, this approach allows for you to see a better average price for your investment and smooth out the market fluctuations you may encounter.
3. Reinvesting profits
Often, people see investments pointing in a positive direction and decide to cash in on their profit, but this can be detrimental. Reinvesting them into your portfolio harnesses the power of compounding, where your earnings help you generate further earnings. This, over time, can increase the value of your investment quickly and significantly. Imagine investing £1000, and it delivers a £100 profit. You are now making gains on £1100 and not the £1000 initially invested if you withdrew the £100 profit. When that £1100 turns into £1300, your profit is already more significant than if you left just the original £1000 in the fund.
4. Making informed decisions thorough research and education
Keeping yourself informed of market trends, economic factors, and new investment opportunities is vital to see growth. Whilst fund managers look after the investments and look to see them deliver results, the speed of growth can vary significantly, and depending on how long you want your cash to be invested will play a large part in how and where you invest.
Continuous learning through reading the fund manager's notes, understanding global trends, and even getting a better grasp of investment terminology all stand to give you better growth. It is essential to stay as connected and informed as possible so that when you decide to invest or withdraw, you are as knowledgeable as you can be, that the decision you made is the optimal one to get the most from your investment.
5. Long-term perspectives
They say good things come to those who wait, and long-term investing is often the right way to go if you want to see growth from the capital you invest. Historically, long-term investments have shown resilience in coping with market fluctuations and anomalies. As a result, the returns have proven to be more consistent. Going long-term rather than short gives your investments the time necessary to get the forecasted results and compound effectively.
6. Understand the risk
Your investment won’t grow if you don’t understand the risk behind it. Different investments have varying levels of risk, and at times, that level of risk can be enough to make some people feel uncomfortable. Investing in low-risk funds may deliver results, but they could be slower to accumulate. High-risk funds, on the other hand, are more likely to deliver fast and more substantial growth but should the fund perform badly the losses will be just as large, or larger, than the gains.
Going into any investment, you should decide how willing you are to accept that there will be peaks and troughs. If you want steady growth, then a low-risk investment may work better for you. If you want substantial growth then opting for a high-risk fund would be the better option. You just need to be prepared to accept losses along the way. That being said, losses, nor gains, are ever a guarantee.
7. Seeking advice from professionals to enhance your strategy
Financial advisors and investment professionals can help cultivate your optimal investment strategy. By aligning your goals with a strategy, they can see how much risk you are comfortable with, the level of investment you wish to make and what your objectives are. Then, with that knowledge, they can give you something to work with. This kind of advice can be invaluable, especially to new investors or those considering investments in a sector where they have no prior experience.
Conclusion
Accelerating growth in your investments requires a combination of strategies tailored to your goals and your risk tolerance. By following the seven tips above, you can start to build a robust investment strategy that manages risk, and delivers the growth you hoped for. It should be noted though, that whilst these seven tips can help you see your investments grow, you should only invest when you feel comfortable doing so. Considering your current financial obligations and life circumstances should be paramount. Proper research should be carried out before committing to any investment, and the guidance of investment professionals is always advised.