Investing in stocks: the key to maximizing returns
The main advantage of investing in stocks is the prospect of increasing the value of the invested capital.
For example, if you want long-term growth, you have to invest in equity. It is the only asset class that has consistently proven itself.
Apart from this, equity fund investments provide investors with diversified investment options, across multiple asset classes like stocks, debt, gold, etc. for a minimum initial investment amount.
Industry experts claim that diversification is also necessary within the stock portfolio, as not all money can be invested in just 1 or 2 stocks. An ideal stock portfolio, according to experts, should be diversified across at least 10-20 stocks.
Here are some things to keep in mind when investing in stocks;
· Stocks as an asset class are intended for the long-term financial goals of any individual. Long term, where the investor has an investment horizon of 5+ years.
· If you invest your money in stocks for the short term, the value of the investments can fluctuate a lot in the short term for months or even a few years.
· For long-term goals such as a retirement fund, fund for college education, and long-term wealth building, investing in stocks makes sense when fighting inflation is the primary requirement.
· While investing in stocks, choosing a good stock mutual fund portfolio is necessary.
· Experts say that investing in stocks is a complex exercise and various factors must be taken into account, outsourcing the decision of choosing the best funds to a good advisor is the ideal choice.
Where to invest?
If you’re considering investing in short-term equity funds, experts say liquid assets are the best bet. Liquid assets should be sought for short-term parking of excess cash.
Bond funds, on the other hand, involve interest rate risk and credit risk. Note that the price risk of bond funds is generally much lower than that of stocks.