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Protecting your personal finances is priority number one because you and your family are priority number one. Financial solvency might seem as if it is rocket science, but it isn’t. Yes, investing is complex, and you should never enter into without knowledge and proper guidance, but you can boost your portfolio using some relatively simple steps. Being wise with your money goes beyond saving for a rainy day. It also includes a comprehensive financial strategy that encourages diversification.
1. Don’t Go With the Flow
U.S. News and World Report suggests those looking to boost their personal finances should avoid jumping on the bandwagon. For example, you might think it’s a good idea to snatch up as much stock as you can afford the minute a popular company opens its initial public offering, but oftentimes it’s wise to “wait for the right moment,” says Buchanan Capital CEO Martin Buchanan. You might think the top stocks are the way to go, but Buchanan suggests grabbing some unpopular asset choices, as well. This diversifies your portfolio and gives you a chance to enter a market, such as oil and gas, at a downtime and then ride the wave until the stocks rise, which they inevitably do.
2. Pad for That Risk
This being said, you’ll still want to pad your portfolio for risk. Cary Cates, a certified financial planner, confirms what many investors have known for decades: low-cost mutual funds and bonds are an important asset in your portfolio. These are holdings with a strong and solid growth reputation that also benefit you at tax time. Yes, they grow slowly, but this is what you want, because high-risk stocks might shoot to the stratosphere but they’re called high risk for a reason. Alongside mutual funds and bonds, you can also pad your portfolio with personal assets such as your home and life insurance. These are liquid assets you can utilize to get cash when needed if set up to do so.
3. Accept Experts Know More Than You Do
Unless you work in finance, it’s safe to say that others know more about this than you do, so follow the experts. Perhaps the most famous financier in the world is Warren Buffett, and it’s wise to pick up a few shares of his Berkshire Hathaway stock if you can afford it. Buffett has diversified Berkshire Hathaway to take the hits when the hits hit the market – sorry, that’s a mouthful – but this is exactly why it’s worth the initial investment and its weight in gold. Berkshire Hathaway is well diversified to ensure its investors always see again, so look for holdings like this one. Be careful, however, and do your homework. Many thought Bernie Madoff was a sure win, too.
4. Keep Track
Finally, performing your due-diligence means more than ensuring you don’t invest in a Ponzi scheme. Before you invest in anything, review the business, fund, or bond and its financial reports. You should never invest blindly. Make certain any investment has a history of profitable returns but also accounts for any losses. Losses are inevitable and they should be reflected in all reporting. The investment should explain past, current, and existing losses and the plans to overcome them. You should also stay on top of your current investments. Review all reports quarterly, and review your portfolio, too, so you can see how it is working for you and your personal financial goals. Make adjustments where necessary.
When you stay on top of your personal finances, you ensure your money works for you instead of against you. If don’t feel confident with your assets, seek professional guidance. Personal finance isn’t always a do-it-yourself thing, but you can remain hands-on if you invest wisely and keep track of your investments and their activities.