Money doesn’t guarantee that you are a more astute investor than someone with less money. There’s a notion that high net worth investors invest mostly in private equity and hedge funds, but this isn’t necessarily true.
Although they may have handsome payoffs, the costs associated with such investments are huge. Conventional asset classes are more reliable investment options in the long term. How can you maximise your investment for more returns? Here are some tips:
- Know how much your investments cost
What are the fees? To become a successful high net-worth investor, focus on a wide diversification at the lowest costs available. Having actively managed funds attract higher fees, but don’t guarantee that they will outperform the market.
Ensure that you are aware of the fees and taxes applicable to certain investment decisions before committing financially. Costs must be one of the key considerations of any investments, because if you are not careful, they will eat significantly into your returns. Nobody wants this, no matter how much income they make. You can be more tax-savvy by investing in portfolios that don’t turn over frequently.
- Make the most of your time with worthwhile investment
Too many people waste time hunting for the next big thing. The average investor may spend a considerable amount of time trying to discover the next Google or Whatsapp. This can be heavily tasking. Instead try to grab the entire market with a low-cost index.
Sometimes cheap stocks may be your best bet. It is usually harder to trade in a £45 stock because your risk is £45 and the investment is symmetric on either the up or downside. On the other hand, when you go for stocks trading at £20, your chances of profiting are better, and you have a smaller capital at risk.
- Know your risk appetite
Before choosing any investment, ask yourself how much you need the money and if you can stand to lose it. To sleep better at night, write down how much you need to have at the end of the year. This will help with planning and guiding your risk-taking choices.
Once you know your end-goal, you can choose more fitting investments. For instance, if a high net-worth client has £10 million to invest and needs about £8 million by year end, he or she will choose to invest 80% in fairly safe investments and 20% in high-risk but income-generating investments.
- Unattractive-looking stocks may be your best investment
Always being in the news for one reason or the other doesn’t make a company a good investment choice. Conversely, there are profitable stocks from companies that don’t make much noise. When selecting stocks, professionals advise to go for companies with at least £50 billion market cap, a large dividend yield at FTSE, a balance sheet liquidity and so on.
You may also determine a company’s health status by assessing their current ratio, quick ratio and working capital. Companies that fit the criteria listed can be found in auto, big pharmaceuticals and energy industries.
- Don’t panic
It is important to stay on top of your investments by making the right decisions. Avoid panic buys and other knee-jerk reactions associated with some inexperienced investors. Always include a log-term plan in your portfolio, as well as, diversifying them across industries to spread the risk.
Information is key. You want to make sure you are current on market news and performance. When you are informed, your investment decisions are smarter and you reap the reward over time. For added security, it is recommended that you consult a wealth management professional to help make the right moves.