Whether your financial portfolio took a major hit in the recession of the last few years, or you’re just getting your financial footing, keeping your portfolio simple is one of the best ways to guarantee success and growth. Complex investment strategies might work for some people, especially people who devote a lot of time and energy to studying markets and returns. However, if you have other things going on and you cannot devote all of your free time to obsessing about your money, the best thing you can do for your financial portfolio is to keep it simple. Here are five very basic ways to improve your portfolio:
1. Invest automatically. I am always talking about the beauty of automatic investments. For as little as $25 per month, you can invest in a mutual fund, college savings plan or other investment vehicle which will provide financial growth over time. It is as easy as filling out an application, which can often be done online if you want to use a national broker such as T. Rowe Price or Fidelity. You will likely have to make an initial deposit, which can often be as small as $100 or $250, and then you can choose the amount you invest every month. Transfer the money directly out of your bank account so you don’t have to think about sending in a check. This is the best, most affordable and even the simplest way to boost your financial portfolio.
2. Financial planners. If you are not currently using the services of a broker or a financial planner, you should seriously consider it. These finance professionals are not a luxury for million dollar investors and high rollers. They can be a great resource for everyone and anyone, whether you are a small investor who wants to maximize limited funds, or a soon-to-be retired public servant who is looking for smart ways to plan ahead. Ask for referrals and recommendations and do a little research online. You should be able to find reliable, smart and eager financial advisors in your area, no matter how little money you have. Talk about fees; some will offer services for a flat fee and others will charge a percentage of your overall financial portfolio.
3. Invest more. Your financial portfolio cannot grow with pixie dust and secret chants. You have heard the phrase “it takes money to make money” and while this is not always true, it helps when we’re talking about investing. If you are making your minimum $25 per month investment, that’s great. However, you will earn more in the long term if you can bump up that monthly investment to $50. Take a look at your budget and trim what you can in order to invest more.
4. Maximize your 401K. If your company matches a 401K contribution, you should be maxing out what you put in. If you don’t, you’re leaving free money on the table. Most corporations, business and nonprofit agencies set up retirement funds for their employees, and you will be allowed to contribute money before taxes are taken out of your salary. This is the first benefit. The second is when the company offers a match. Take advantage of this, and your financial portfolio will make huge strides.
5. Invest any one time amounts. If you receive a large cash gift or an inheritance, invest it. Any money that you did not expect or count on as part of your salary or income should be put to good use. If you invest it, the money will end up working for you. This will pay much better dividends than a trip to Hawaii or yet another big screen television.