As the global economy is on its way to recovery, many new investment instruments are also being added to the market. While the upcoming year 2022 is expected to bring many opportunities to invest, save and spend, it becomes tricky to pick the right investment strategy that offers you steady long-term growth.
This blog will explain the best investment strategies that will help your money grow in the long run.
7 Investment Strategies for Long Term Growth
1. Start Investing as Early as Possible
Even a penny invested ten years ago is more valuable than the lakhs of rupees invested now.
Investing is always beneficial, and you should never delay doing so. The earlier you invest, the more you will reap the benefits of your investments. Hence, the best investment strategy for long-term growth is investing as early as possible. And for that, you do not need thousands and lakhs of rupees-a tiny yet consistent money invested yields better returns than infrequent and massive amounts.
2. Diversify and Rebalance
As you start investing, ensure you diversify your portfolio well so that your portfolio consists of various securities of various sectors such as pharma stocks, IT stocks, Exchange Traded Funds (ETFs), gold, bonds, mutual funds, and so on.
Moreover, to seek long-term growth, only diversifying is not enough. You will also need to review your portfolio’s asset mix, e.g., equity 70% and debt 30%. If you target your asset mix to remain at 70:30, and due to the market fluctuation, if your asset mix moves to 50:50, then you must consider rebalancing your portfolio to ensure long-term better returns.
3. Follow Growth Strategy for Stocks
The growth strategy best suits you if you want long-term growth. In this strategy, growth investors invest their money into the stocks of big companies ensuring constant and positive returns for a more extended period.
For example, investing in tech companies proves beneficial as Artificial Intelligence is taking its peak. Similarly, considering the growth of FinTech and Banking-as-a-Service products, investing in the financial sector could be an excellent idea for long-term growth.
4. Understand the Risk-adjusted Returns
When calculating the risk-adjusted returns, you consider the risks involved while calculating how much return you will generate from your investments. Hence, the risk-adjusted return returns less the risks involved, giving you the net return caused, called a risk-adjusted return.
Calculating the risks involved is not entirely straightforward; specific methods such as Sharpe’s Ratio and Treynor’s Ratio help you derive the risk-adjusted returns. However, many brokers and agents now provide information regarding the risk-adjusted returns while explaining their investments.
5. Say No to ‘Time the Market’
You can not time the market, and it is the golden rule of trading and investing in the stock market. The misbelieves that you will lose money if you buy stocks during a bullish market and you should sell your investments during a bearish market supports the concept of timing the market.
The stock market is unpredictable, and with the right approach towards investments, you can achieve your financial goals but not by timing the market.
6. Know Your Investment Costs
Before buying stocks or mutual funds, understand how much you have to pay to buy a particular stock. For example, you will only need to spend one-time Demat account opening expenses to buy a stock. On the other hand, if you buy mutual funds from the same Demat account, you will also incur a cost in the name of an ‘expense ratio’-a fee charged by the fund managers to manage your portfolio.
7. Be a Consistent Investor
Once your investment journey starts, be a consistent player in investing money regularly. You may reduce the amount of your investment in times of financial distress, but you must keep investing in fetching better long-term returns.
A consistent investor who invests a tiny amount yet remains constant may grab more returns than an investor who invests a lump-sum amount once.
Planning your finances for the long-term needs a lot of knowledge of many possible options as you would love to grow your money with the best possible investment strategy.
With WealthDesk you can invest in a portfolio of stocks and ETFs, curated by SEBI registered professionals. You can invest in the theme, sector, or idea you believe in with WealthBaskets.