Portfolio investment strategies for growth are as varied as your actual portfolio. Some come with more risk than others, some have a longer time horizon, and some require a minimum investment amount. All these factors (and more) will inform which portfolio investment opportunities are right for you.
Consider these popular strategies as you explore and evaluate your options for growing the value of your portfolio.
When you have a long timeline, the tried-and-true approach is to buy and hold a diverse portfolio of investments. There may be fluctuation over time, but history has shown that this strategy typically pays off in the long term. If starting young with a plan to buy and hold, many choose a more aggressive (and risky) strategy that includes a percentage of investment in growth sectors with the potential for above-average returns.
As your risk profile evolves, adjust your asset allocations accordingly. Of course, investing never comes without risk, but building a well-diversified portfolio and holding for the long term is one of the lower-risk methods for growing an investment portfolio. However, if you don’t have the luxury of time and did not start investing early, this might not be the most fruitful approach for you.
At the other end of the spectrum, market timing carries the potential for a much higher reward, but it’s also paired with much higher risk. This investment strategy relies on timing the purchase and sale of individual investments to maximize returns, but it’s not for newcomers or the faint of heart. Most people don’t have the knowledge, experience, or time to invest in this manner, but it is an option that has the potential to yield significant returns.
Investors need to consider diversification within a singular asset class (stocks/equities) and across different asset classes. For example, you might buy and hold a diverse portfolio of stocks and invest in other asset classes such as mortgage debt, real estate, venture capital, private equity, litigation finance, and more. This approach spreads the risk such that when one asset class is performing poorly, the others are hopefully performing sufficiently well to avoid an overall loss. A portfolio diversification strategy also benefits from a long-term approach.
The first rule of investing is understanding where your money is going and knowing what you're investing in. If you don't understand it, find a professional who can help you, such as a registered investment advisor or certified financial planner. Both types of professionals act as fiduciaries, which means they are required to put your interests first.
If your strategy includes expanding into asset classes outside the stock market, real estate investment has proven to be a relatively reliable option. However, not everyone has the time or interest to research investments, negotiate with sellers, or manage properties.
You can still capitalize on the market by investing through a private hard money lender. These lenders offer private loans secured by real estate equity, so even if the borrower defaults, some or all of the investment can be recovered. They do all the work to attract and vet borrowers, and you benefit from predictable returns from the loan interest.
You need a minimum net worth to become an accredited investor, so this type of investment doesn’t work for everybody. Once qualified, evaluate the various investment opportunities with your hard money lender. Ensure you understand the terms and time commitment before making any investments.
With more than $1 billion in loans funded, Socotra Capital is a well-established hard money lender with a strong track record of reliable returns for investors. Talk to your financial advisor about incorporating mortgage funds into your portfolio and reach out at any time with questions.
If you want to learn more about portfolio investment strategies, check out our Guide to Building a Resilient Portfolio.