Choosing where to invest money is not an easy task for any investor. There are, however, a few basic principles that can be applied to ensure the maximum Return On Investment, or ROI. Using these principles as a guide will help build a pathway to financial independence.
Diversification is an indispensable risk-management practice. By investing in a variety of different financial products, one investment falling through will not ruin an entire portfolio. The old adage says not to put all of one’s eggs in a single basket. Without adequate diversification, a portfolio is at greater risk. An example a diverse portfolio is one that is invested in stocks, mutual funds, bonds and commodities.
Liquidity is another key strategy. Choose investments that can be liquidated with a minimum hassle. A savvy investor doesn’t want to turn down an ideal opportunity because all of their assets are tied up in other, not as lucrative, ventures. Furthermore, liquidity allows an investor quickly to sell off any investments that are in decline and negate any negative impact on a whole portfolio.
Lastly, consider the Speed Of Return, or SOR, on an investment. One way to build success in the marketplace is to choose investments that pay dividends quickly, then re-invest capital, profit, or both. The sooner a return on an investment is made, the sooner that money can be turned around into a larger investment that has the potential to yield an even larger result.
Follow these principles and you’ll be a savvy investor who knows exactly where to invest money effectively.
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