7 simple strategies to expand your portfolio

Although a small number of investors are content to get income from their investment portfolios without increasing them, most investors want to see their reserves increase over time. There are many ways to increase the investment portfolio, and the best method for a given investor will depend on various factors such as their risk tolerance, time frame, and the amount of principal that can be invested.

There are several ways to add value to your investment portfolio. Some people need more time or risk more than others. However, there are various proven methods that have been used by various investors to increase their funds.

Define growth

In terms of investment, growth can be defined in many ways. In the most general sense, any increase in the value of an account can be considered growth, for example when a certificate of deposit pays interest on its principal. But in the field of investment, growth is usually more specifically defined as capital appreciation, in which the price or value of the investment will increase over time. Growth can occur in the short and long term, but substantial short-term growth usually brings a higher degree of risk.

Buy and hold

Buying and holding investments may be the simplest strategy to achieve growth, and over time, it may also be one of the most effective strategies. Investors who simply buy stocks or other growth investments and keep them in their portfolios with only a small amount of monitoring are usually pleasantly surprised by the results.

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Investors who use a buy and hold strategy usually do not care about short-term price changes and technical indicators.

Market timing

If those who pay more attention to the market or specific investments can correctly grasp the market timing and continue to buy when prices are low and sell when prices are high, they can beat the buy and hold strategy. Over time, this strategy will obviously generate higher returns than simply holding the investment, but it also requires the ability to correctly measure the market.

For ordinary investors who do not have time to observe the market every day, it is best to avoid market timing and focus on other investment strategies that are more suitable for the long-term.

diversification

This strategy is usually combined with buying and holding methods. Many different types of risks, such as corporate risks, can be reduced or eliminated through diversification. A large number of studies have proved that asset allocation is one of the key factors in investment returns, especially in a longer period.

The right combination of stocks, bonds and cash can make the growth risk and volatility of the portfolio much lower than that of a portfolio that is fully invested in stocks. Part of the reason diversification works is that when one asset class performs poorly, another asset class generally performs well.

Investment growth areas

Investors who want substantial growth can focus on economic sectors such as technology, healthcare, construction, and small-cap stocks to obtain above-average returns in exchange for greater risk and volatility. Part of the risk can be offset by longer holding periods and prudent investment choices.

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Dollar cost averaging method-DCA

DCA is a common investment strategy, most commonly used in mutual funds. Investors will allocate a specific dollar amount to regularly purchase shares in one or more specific funds. Since the price of the fund will vary depending on the purchase cycle, investors can reduce the overall cost basis of the stock because fewer shares are purchased during the period when the fund price is higher and there are more stocks to buy when the price drops.

Therefore, the dollar cost on average allows investors to derive greater returns from the fund over time. The true value of DCA is that investors do not need to worry about buying at the top of the market or carefully scheduling trading times.

Dog of the Dow

Michael O’Higgins outlines this simple strategy in his book “Beat the Dow”. The “dogs” of the Dow Jones index are only the 10 companies with the lowest dividend yields in the index. Those who buy these stocks at the beginning of the year and then adjust their portfolios annually will usually exceed the index return over time (though not every year).

Several unit investment trusts (UIT) and exchange-traded funds (ETFs) follow this strategy, so investors who like this idea but don’t want to do their own research can buy these stocks quickly and easily.

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Can lose weight

This method of selecting stocks was invented by William O’Neil, who was Investor Business Daily. His methodology is quantified by the acronym CAN SLIM, which stands for:

  • C-The company’s current (C) quarterly earnings per share (EPS) needs to be at least 18% to 20% higher than a year ago.
  • A-(A) Annual earnings per share need to reflect substantial growth over at least the past five years.
  • N-The company needs to do some (new) new things, such as new products, management changes, etc.
  • S-The company should try to repurchase its (S) issued shares. This is usually done when the company expects high profits in the future.
  • L-The company needs to be the (L) leader in its category, not a laggard.
  • I-The company should have some (but not too many) institutional sponsors.
  • M-Investors should understand how the overall (M) market affects the company’s stocks and when it is best to buy and sell stocks.

Bottom line

These are just some simpler ways to make money grow. Individuals and institutions have used more sophisticated technologies that use alternative investments, such as derivatives and other tools, to control the amount of risk taken and amplify the possible benefits. For more information on how to find the right growth strategy for your investment portfolio, please consult your stockbroker or financial advisor.

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