Any kind of investment involves risk. This is a fact; if you are playing the market in the hope of increasing your initial investment, then there will always be a chance that the value of your holdings will go down as well as up. Generally speaking, the greater the risk, the greater the potential profits, but some risks may not be worth taking; a smart investor will balance high-risk investments with safer ones that may offer a lower yield, but should remain steady when things get rough.
Ultimately the only safe investment is in cash, and you should always keep a substantial amount of cash savings before you begin building an investment portfolio. At least three months’ worth of living costs is a good rule of thumb. After that, you need to ask yourself whether you are investing for the short or for the long term. In the short term you might want to gamble on high risk investments in order to maximize your profits as quickly as possible, whereas, looking at the long term, lower risks can give a regular income that will gradually, if unspectacularly, increase in value.
A balanced portfolio
All successful investors agree that diversification is the key to survival and profit in the market. This means having a variety of assets in your investment portfolio. Equities, bonds, property and commodities are all different classes of assets, and having some of each will help you weather changes in the market. Diversify geographically too, with stocks and shares in companies from around the world, and invest in different sectors; telecommunications as well as mining, pharmaceuticals alongside retail.
It can be a good idea to seek the advice of a professional investment firm especially if you are investing in the overseas market. Fortress Investments is a multifaceted investment management group that handles both traditional and alternative investments, and is listed on the New York Stock Exchange with $58bn in assets. Looking at co-founder and Chairman Wes Edens’ resume you can see how he worked in executive roles at several major investment and banking firms before founding Fortress in 1998, including the United Bank of Switzerland, Black Rock and Lehman Bros. His wealth of experience ensures that Fortress is adept at handling investment portfolios both large and small.
A balanced mixture of six to eight investment types makes a healthy portfolio, and this should be reviewed and if necessary rebalanced regularly. Build up gradually and do your research, and with the right advice you should find your investments will see you through to a profitable and secure retirement.