Table of Contents Hide
- 1. Always Keep Learning
- 2. Diversify, Diversify, Diversify
- 3. You Can Afford to Take Risks
- 4. Hire a Professional Portfolio Manager
- 5. Play the Long Game
- 6. Know that Volatility is a Part of the Game
- 7. Know the Tax Implications of Your Investments
- 9. Fees, Fees, and More Fees
- Portfolio Management Tips that Get Results
The phrase young investors might seem a little out of place. You hear the stories about young people being too burdened by debt, so they don’t invest.
Only about 20% of millennials invest in the stock market. If you’re one of them, congratulations. Most don’t invest because they don’t know how, have debt, or don’t have enough money set aside to invest.
If you’re one of the smart ones who is building an investment portfolio, you want to make sure that it’s well managed. Keep reading to find out the top portfolio management tips to keep your portfolio strong for years to come.
1. Always Keep Learning
Young investors don’t invest because they don’t know how. You know enough to start an investment portfolio, but there’s always room to keep learning.
You need to know how to research potential investments, the companies you’re going to invest in, investment vehicles, and more.
Take investment classes, talk to other investments, join investors groups on Meetups. You’ll probably be the youngest one in the room, but don’t let that discourage you. Use it to your advantage by asking questions and finding people to help you.
Many older investors would love to mentor someone who’s ambitious and smart.
2. Diversify, Diversify, Diversify
The most important thing you can do is diversify your stock. You don’t want to have all of your investments in one particular asset or industry.
For example, if you put your investments in tech stocks you could lose it all if there’s another tech bubble burst.
You may not remember this, in 2000-2001 there was a major tech bubble bust that cost investors billions of dollars. The NASDAQ lost about a third of its value during this time.
While the economy may seem like it’s booming in tech or real estate again, use caution and spread your investments around. You should invest in different industries and in different types of investments.
3. You Can Afford to Take Risks
The great thing about being young is that you can afford to take risks in your investment portfolio. You don’t want to be reckless, but if you do your research and you see an opportunity, invest in it.
If the investment loses money, you have the time to get it back. On the other hand, as you get older and closer to retirement age, you’ll need to take a conservative approach to investments.
You can take risks, but smart risks.
4. Hire a Professional Portfolio Manager
You may be hesitant to manage your investment portfolio yourself. There are plenty of portfolio management services like Motilal Oswal PMS that can help you manage your investments.
If you choose to hand off your investments to someone, it doesn’t mean that you should stop learning about investing. You want to take responsibility and know exactly what your portfolio manager is doing with your funds.
5. Play the Long Game
As a young investor, you might be tempted to engage in get rich quick wealth-building strategies. You don’t need to do that as long as your portfolio management skills are sharp.
Investing is about making a well-informed decision and sticking with it. Use your education and your skills to determine when to sell and when you should hang on to an investment.
6. Know that Volatility is a Part of the Game
The financial markets go up and they go down. That’s how they work. There are some periods where they fluctuate so much that you don’t know what to do with your money.
The main thing to remember is that it’s easy to react to the volatility. Too many investors act out of fear and sell when they should hold a stock. The fear drives them to make the wrong decision.
You can avoid that fate by taking a step back and take an objective perspective about what’s happening.
7. Know the Tax Implications of Your Investments
You can’t afford to mess with the IRS. Your investments have tax implications, especially if you cash out an investment or get paid dividends.
For example, if you cash out your 401(k) or other types of investment, that counts as income. You’ll be taxed as if it’s income. That’s going to be a much higher tax rate than you’d want to pay.
You’ll want to work with an accountant or tax attorney who can advise you on wealth management strategies that will help you lower your tax burden.
9. Fees, Fees, and More Fees
There are a lot of fees in the world of investments. It seems like everyone gets a cut of your investment. Knowing the different layers and types of fees should be part of your education process.
You want to make sure that you know what you’re paying for. There are management fees, commission fees, mutual fund fees, and mutual fund surrender fees, just to name a few.
Portfolio Management Tips that Get Results
Young investors have the best advantage possible, which is time. You have the time to allow your portfolio to build up over time. You can afford to take risks and have the time to recover.
That gives you a lot more flexibility in your investments because you have the time to allow your portfolio to grow. That doesn’t mean that you’re going to retire a millionaire, though. You do have to play the long game and be patient. The one thing that brings down investors is fear. If you don’t react to the market, your portfolio will serve you well.
Do you want more stellar financial tips? Take a look at the finance blog to learn about building up your credit.