Investing is the ultimate way of growing your wealth and while many people know this, it doesn’t mean they themselves have become rich by these means. Sure, they may know which types of investments exist like stocks, bonds, mutual funds and real estate. They may even know how to find investments that will offer them a profit. However, what most investors don’t know is how to maximize those profits. Here are 7 ways you can do just that so get ready to optimize the way you invest your money!
Number 1: Doing your homework before investing
There is a saying that proper preparation prevents poor performance. This statement is true if you want to make maximum profit on your investment. No one can succeed in what they do without proper knowledge. Therefore, if you want to succeed as an investor, you need to do adequate research before putting your money in any investment.
You have to know that investing your money is a risk in itself. That is, you are not guaranteed that there will be a profit on your investment at the end of the day. The risk involved depends on the type of investment too. For example, the risk of investing in treasury bills and Certificate of Deposits (CDs) is fairly low when compared to the risk of investing in stocks. And the way it works is that the greater the risk involved, the higher the expected profit.
But you need to understand how this works so that you don’t lose your money. High-risk investment does not always produce the highest profit. And low-risk investments are not always the safest. Warren Buffet, the investor billionaire, has this to say about risk. “Risk comes from not knowing what you’re doing.” That means you should never invest in what you don’t understand. You can hardly go wrong if you follow this rule and only invest in what you understand.
And it’s never been easier to do proper research on the investments you are seeking to buy. You can check the company you want to invest in online and read reviews about them from other people who have invested in them. You can also leverage mentors and professionals to know if it is the right investment. In fact, I will go over this point shortly.
Some questions that you should ask before you invest are as follows: Is the investment registered? What are the risks involved and the potential benefits? Will I be making a profit at the end of the day?
If you want to maximize your investment returns don’t invest in anything until you have done your homework.
Number 2: Leveraging mentors and professionals
Another important point to consider when aiming to maximize investment return is leveraging mentors and professionals. You’re probably not new to investing since you’re looking for ways to maximize your investment returns. However, there may be a few things that you still need to know that a mentor will be able to teach you. You can learn all these things by yourself but it will take too much time. It may even involve some costly mistakes that will make you lose all the money you’ve previously invested. Mentors who have recorded a consistent level of success in investing will know how to avoid these mistakes and also help you avoid them too.
Even the famous Warren Buffett had a mentor. Warren Buffett’s mentor was Benjamin Graham who wrote the famous book, “The Intelligent Investor”. Warren Buffett enrolled in a business school after reading the book just to be able to learn from his mentor. He developed a strong relationship with him and later worked in his company as he learned his principles of investing.
So you see, financial mentors are important if you want to maximize your investing returns. You may not find someone like Warren Buffett or Benjamin Graham as a mentor but you can leverage the help of those in your network or professionals. These professionals called financial advisors give you financial advice on how to invest and manage your money. They help you plan and monitor your investments. You either pay financial advisors a flat fee or you pay them a certain percentage of your investment, say 1%.
If you are employing a financial advisor to manage a small amount of money, it will be better to pay a management fee rather than a flat fee. This is because the cost as a percentage of the total money invested will be less costly than a flat fee. However, if you investing large sums of money then a flat-fee structure may be more economical.
Number 3: Investing for the long-term
Patience is a virtue when it comes to investing. You should not see investing as a get rich quick scheme because it is not one. You need to see investment for what it is. It is a tool to build wealth steadily over time. Long term investment means investments that last for a minimum of one year.
You may wish to make a good profit within a short time but committing to the long game is a much more proven strategy. Interest paid on long term investment accumulates and becomes a compound interest. This will increase your total obtainable profit.
When you invest in the long term you don’t need to worry about the fluctuation in the market price. Since you know that your investment is going to be across a long time horizon, your mind will be at rest knowing fully well that the market will correct itself and things will be back to normal.
It is usually the only option that has low risk and high return. When you invest for the long term, you are sure that you are going to make a profit at the end of the day and that the risks you will face should be smoothened out over the course of time. The short-term on the other hand is hard to predict and because of this there are greater chances of losing money which is obviously not a way to maximize your investing returns.
Number 4: Using a Robo-advisor for stock investing
You can maximize your investment return by doing away with the financial investors and using a Robo-advisor. Robo-advisor is like your financial advisors. Just that they are not humans but they are digital platforms that provide automated financial services. They are designed to work without supervision. Based on their programming, they are able to collect information about your financial situation and offer advice on how to invest. After signing up, it asks you for details such as the amount you are willing to invest and how much risk you are willing to tolerate. It makes decisions based on this information to design an investment plan for you.
The first advantage of a Robo-advisor in maximizing profit is that you don’t have to pay any financial advisor any money to do what the Robo-advisor can do. The goal is to make more investment return so you must take advantage of every platform available. The human advisor will charge you higher than the Robo-advisor. Robo-advisors charge fees as low as just 0.25% and 0.5% whereas human advisors can charge as high as 1% for similar service.
They are not expensive and that makes them a good option for anyone who wants to maximize their return on investment. They are designed so that almost anyone can find it easy to invest. There are no minimum balance requirements which makes it a good option even when you don’t have much money.
Number 5: Finding your optimal asset mix
How you allocate your assets can determine whether you will make the maximum return on your investment or not. The asset mix is how you divide your investment portfolio. Like the saying goes, do not put all your eggs in one basket. You don’t want to put all your money in one asset and luckily there numerous options to choose from like investing in bonds, stocks, mutual funds, and real estate.
The way you allocate your asset will be determined by the time you want to wait and also the amount of risk you are willing to take. Depending on your goal, you may want a long term investment plan or a shorter-term with less risk. The more risk that investment has the more profit it is possibly going to produce. To have an optimal asset mix, it is recommended that you choose both high risk and low-risk investments as well as those with short and long term time horizons.
Low-risk investments include cash and its equivalents such as the treasury bills and certificates of deposit. They are safe and have lesser risks. However, they also come with low profits. That is why you need to find an optimal asset mix and add high risk and high paying assets like stocks to your investment portfolio.
Number 6: Manage your own physical properties
If you have physical property, you may want to consider hiring a property manager. There is nothing wrong with hiring an expert. However, if you want to maximize your return on investment, you need to consider managing your property by yourself. This will save you a lot of money and at the end of the day increase your investment returns.
Property management is not as hard as it seems. You only need some basic knowledge and you are good to go. This is a decision you will be glad you made. You can easily do your own repairs since most of them are just minor repairs and in the case of a major repair, you can easily get a professional to fix it for you. A property manager on the other hand would probably hire the first contractor they come across which would cost you a ton of money but by managing your own property, you can compare the prices from different managers and thereby save yourself more money.
So how much savings are we talking? It’s not uncommon to pay up to a 10% monthly fee for a property manager to manage your properties. And some of their services like collecting rents are easy things that you can do by yourself. In fact, some of this process is done online and the property manager has little or no role to play. Managing your property by yourself will save you the 10% fee you ought to pay a property manager and will help you maximize your investment returns!
Number 7: Hunt for hidden fees
It’s possible to be paying for fees that you don’t know about. You have to hunt for these hidden fees to make a maximum return from your investment. Many people don’t even realize that they are paying this money. And some others think it is just a small amount and does not matter. Well, it does matter if you want to make a profit.
The first place you should hunt for the hidden fees is in your financial advisor’s bill. They can be paid a one-time or sometimes a continuous fee for managing your account. If your investment goal does not need management you may decide to pay a one-time fee. This will save you from the hidden cost that you lost in the name of paying financial advisors.
Another hidden cost to hunt out for is the commission that most brokers take when you buy or sell investments using their service. You need to understand how this works and know how much they charge you each time you use this service. You also need to understand how mutual funds work. You will be charged an expense ratio for managing your mutual funds. You should always lookout for ways to pay the lowest cost!