Although it may not be so evident from the volumes of materials that have been written on the subject, investing is an evolving activity that changes from one year to the next. Gone are the days of simply investing in a term deposit that allows you to compound your interest payments and over the course of ten years you will have doubled your principal. As a result of falling interest rates over the past two decades, investment strategies have shifted and have become more “advanced.” These days, the following three investment strategies can be used to enhance your investment portfolio’s returns over the short-, medium- and long-term.
1. Diversification. Expanding your investment portfolio to include non-traditional types of investments is virtually mandatory in today’s interest rate environment. Faced with low “guaranteed” rates, investors are having to look at marginally higher risk investments such as equities in order to enjoy the growth they want in their portfolio or other income-producing investments such as real estate if they want to enjoy greater monthly income.
2. Seek income paying equity securities. After the market troubles of 2007, 2008 and early-2009, many investors have returned to the fundamentals of equity investing which states that investing it is wisest to invest in equities that pay dividends. Not only are such companies often better capitalized and can generate steady amounts of cash to pay those dividends, but they are less likely to fail given their leadership in a particular industry or sector. With a closer eye on risk, investors have not only invested in more-solid companies but in companies that pay income as part of the equity offerings.
3. Invest on a regular basis. If nothing else, hindsight has consistently taught us that we would be better off today if we had invested everything we owned at the utter bottom of the market correction. This will always be the case. The problem is that we are not very well equipped to determine when that bottom actually happens. One way to avoid this is through regular investment contributions, whether it is splitting a lump sum over the course of a 12 month period or investing a pre-set amount with every paycheck; investing money on a regular basis allows even the most conservative investors to pay an “average” price for their investments. The end result is that over the long-term they will have paid much less than if they had tried to time the market with less frequent investment contributions.
These three investment strategies are fairly popular and comprehensive given today’s market situation. By investing this way, investors can expect to reap long term rewards. The only caveat is that investors should expect to make changes to their strategies along the way.
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