When it comes to investing, nothing is worse than losing money when you were hoping to earn some in return.
Of course, you don’t have to worry about making any drastic investment decisions just because the stock market begins to take a dive either. However, what you should really do is stay well informed of how much your investments fluctuate and decide how much loss you’re prepared to absorb. Although risk will always be present while dealing with stocks, there are also some strategies that you can use to keep your portfolio moving forward.
When you invest in dividend stocks, you are taking a less-traveled path down the investment trail, but also one that will keep your portfolio moving in the right direction. What a lot of investors don’t realize is that a stock dividend makes up a huge amount of the return that stocks see.
The best way to take advantage of this strategy is to invest in a stock that provides dividends to its shareholders. This strategy will let you see returns that are more than average. Many companies that pay dividends are also able to have their earnings grow at a faster rate than others. Having a higher amount of growth then grows everything else like the stock price and which can then earn you an increase in capital gains earned.
The way that this keeps your portfolio moving forward is through the amount of return you’ll receive overall. This can be seen as you review your monthly dividend stocks.
Diversifying your stocks is another great way to keep your investment portfolio moving forward, especially if the market takes a dive. It is believed that having a diversified portfolio will be able to perform a lot better than one that concentrates on a single stock. A portfolio is able to keep moving forward by growing the number of different stocks that span across many classes of assets. This diversification is what enables the risk to become minimal.
Adding Assets That Are Uncorrelated
As was mentioned earlier, risk is always going to be present in the stock market. What you need to be aware of is how this risk can be reduced. The best way known for this reduction to occur is by including assets that are uncorrelated. These include real estate, bonds, currencies, and commodities.
The thing with assets that are uncorrelated is that they don’t act the same towards market changes like stocks do. In hindsight, they are able to balance your portfolio because they can actually increase as your other stocks decrease so your portfolio will have very little volatility.
Adding Put Options
Adding a put option to your portfolio allows you to make a “bet” that the stock will decrease in its price sooner or later. A put is nowhere near what shorting does and permits the selling of it at a future date and at a set price.
Adding Value Stocks
Adding a value stock is considered to be a profitable way to play the market. This strategy will surely keep your portfolio moving forward because Warren Buffet uses it widely and we all know how that benefit turned out.
The whole idea of adding value stock is to determine which stock will provide the best deal. This is seen among stocks that have become unfavorable by many investors, thus looking like they are not valued as highly as other stocks. This undervalue is mainly due to certain ratios like dividend yields, price-to-earnings, and price-to-book.
If these occur, it is mainly due to some financial news that caused the value of a stock to plummet. This can involve anything from earnings being subpar, lawsuits, or any damaging media coverage. It has to be realized that just because the cause for the drop has gone by, it does not mean the price for the stock has improved. When these companies are invested in it can turn into one of your best investment decisions you could make due to its low price.
Today, value stocks may be looked at as being more reliable and could prove to be a continued choice in order to move your portfolio forward, especially when the market, in general, has become stagnant.