The stock market offers much more returns but because of the element called risk, many people avoid it. Here are some tips to make the most of your long term investment:
- Align your investment with clearly set financial goals:
Every long term investment that you make should have a specific goal associated with it. A clearly set goal with a set goal would let you to find out the monthly contribution required for creating corpus.
- Diversify your risks among different asset:
For a successful investor, it is suggested to diversify your risks by investing in a number of stocks in different markets in mutual funds, bonds and other financial securities. A thumb rule is that no one stock or other investment should be more than 10% of your total portfolio. Investing in different geographic areas such as US, Asia, Europe and other emerging markets. This should give you protection aganist a collapse in one particular sector.
- Do your research:
It is suggested to a bit of research before putting a single penny into the stock market. Invest in those companies who gave outstanding past performance for the past 5 years.
- Reinvest in dividends:
A large part of overall portfolio comes from reinvested dividends rather than appreciation of the stock prices. A yield of 3% or 5% may sound small but over the period of time, it makes a big difference. Go for the investment with a strong and positive history of dividends as they provide the stability for your investment.
- Review your investment at periodical intervals:
Regular monitoring of funds is as important as investment in equity funds. It has been notice that the funds with outstanding performances fail to give the best results for some period. Hence, ensure to compare the returns generated by using your existing funds over the past 1 year with the benchmark.
For better performance, redeem your existing funds if they have constantly underperform over the last 3 years.
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