Its Associated Problems and Their Solutions
It is important to consider many different aspects and create proper strategy before taking any investment decision. Such steps would help you develop a portfolio which will yield desired results and assist you in achieving your financial goals. In this context we will look at investment planning, its associated problems and their solutions.
Investment Planning – Problems and Solutions
Control Trading Frequency
Most often than not, your investments as well as asset allocation strategies start providing desired results after a while.
But if you continue to modify composition of your portfolio and investment strategies then it can lower the returns you are able to get. This happens due to higher transaction fees you will have to pay every time such modifications are implemented. In addition to it, such changes can also increase the uncompensated as well as unanticipated risks you will have to bear.
Thus, you need to have patience when it comes to proper investment planning and implementation.
Follow Principal of Investing – Sell High/Buy Low
Basic principle of investing consists of buying low and selling high.
But oftentimes, investors do the opposite and start buying high, trying to increase their short term returns rather than focusing on long term investment objectives. If you try to concentrate on short term returns then most of your investments would be in current investment fad or in assets which were yielding good return in recent years.
But before taking such investment decisions it will be important for you to know that as any investment opportunity becomes popular, it receives higher attention from investors and accordingly, it would become difficult for you to determine its present value. As such, your primary aim should be to discuss long term investment objectives with your personal financial advisor and taking steps to implement them.
Commissions and Fees
Paying considerable amounts as advisory fees or deciding to invest in high cost funds can be counterproductive since over long term even small rise in commissions or fees would have serious effect on your wealth.
Thus, right at the onset while opening any account you need to inquire about associated costs so as to be sure that you will not have to pay too much in the form of commissions and fees.
In addition to it, you need to ensure that you will be receiving right value for any advisory fees you will have to pay.
It is not possible to foretell what will happen in future but it is certainly possible to take steps which help to shape it. Similarly, it will not be possible for you to control how the market will behave, but it is certainly possible for you to save as well as invest more money.
Continued investment of capital has similar effect (over long term) on wealth buildup as investment returns have. Continued investments are a sure fire method of increasing your chances of accomplishing financial goals you have set for yourself.
Market scenarios continue to change and in such situation you can achieve desired returns by properly diversifying your portfolio.
If you think returns can be maximized by making significant investment in a single investment product then it would be a wrong decision. The reason is that in case of adverse market conditions you will have to suffer losses since you made investment in one single investment product only.
Diversification will help in reducing as well as spreading risk of losses but you will also have to keep in mind that a lot of diversification may also have negative effect on performance of your portfolio. Thus, the best strategy would be to consult your personal financial advisor and create a properly balanced investment portfolio.
To conclude it can be said that investments can easily fail it they are not properly planned and executed. Thus, by discussing your investment goals with your personal financial advisor you will be able to create a portfolio which will help you earn expected returns.