Most investors are constantly looking for ways to grow their investment portfolios. But what does growth really mean? In the world of investments, growth can mean a number of things. If you’re going for a more generic definition, growth usually means any sort of increase in the value of your account. However, when getting down to the specifics, growth is measured by capital appreciation, whereby over time, the value of your investment increases.
Regardless of the kind of growth you’re after, remember that it happens over the course of time, and the type of growth that takes place over a long period carries less risk than short term growth. That being said, if you’re trying to grow your investment portfolio and possibly become the next Jozef Opdeweegh, then here are five ways that you can go about it.
1. Buying and holding
The most common way of growing your portfolio is by using the buy and hold strategy. One great thing about buy and hold is that it is incredibly simple to do. It simply involves buying your shares or stocks and leaving them to grow in value over a very long period of time. In fact, experts believe that buy and hold is the most effective way of growing your investment. Usually, investors that use this strategy keep their bought stocks in their portfolios, only monitoring them occasionally. They end up very happy with the results in the end.
There is one key thing you need to consider when employing the buy and hold method. The investment or stocks you buy have to be from a company, product, currency, or industry that you have monitored for a while. That way, you can be sure that it can stand the test of time. Investing in an unstable market is only going to leave you disappointed.
2. Timing the market
Market timing involves keeping an eye on market movement on a regular basis. As such, investors who follow the market can gain a more substantial growth when compared to those who use the buy and hold strategy. So, if they are able to correctly time the market, they can instantly sell when prices are high and buy when prices are low.
With a market timing strategy, high returns can be achieved, however, you need to know how to accurately gauge the market movement. If you do not have the skills to do that, then it’s not advisable to use this strategy. Also, if you do not have the time to constantly watch the market, especially on a daily basis, then you should opt for other portfolio growth strategies.
3. DCA strategy
The DCA strategy or the Dollar Cost Averaging strategy is typically used by investors who have mutual funds. Mutual funds are a managed investment that involves pooling your money together with other investors. When using a DCA strategy, an investor sets aside an amount that will be used on an occasional basis to buy shares from one or more mutual funds. Since the price of the fund varies from one purchase period to another, the investor can reduce the total cost basis of the shares because fewer shares will be bought while the price of the fund is higher.
What’s more, the DCA strategy allows an investor to accumulate quite a lot of gain from the mutual fund over a long period of time. Furthermore, this strategy is beneficial because as an investor, you don’t have to time your purchases or buy at the top of the market.
This approach to portfolio growth usually goes hand in hand with the buy and hold strategy. The whole idea of diversification is to reduce or completely eliminate the risks that come with investing. It involves putting together the right mix of bonds, cash, and stocks that allow for the growth of your portfolio. You have to do this without attracting a huge amount of risk, unlike a portfolio that is solely invested in stocks.
5. Invest in growing industry sectors
If you’re an investor looking to grow your portfolio fast, then a good way to achieve this is by investing in sectors that are experiencing an impressive amount of growth. Some of these sectors include the healthcare, construction, and technology industries. These investments usually attract very high returns, but note that they also come with very high risk and volatility.
By putting the above tips into practice, you are well on your way to growing a solid investment portfolio.