What to do to reduce your risk in long-term investment strategies
Investing is a great way to grow your wealth for retirement or reaching some other savings goal. However, the market can be unpredictable, and periods of volatility can rock your portfolio and send your investment value in the wrong direction.
This should not scare you away from investing, though. All investments come with some degree of risk, but there are some strategies you can employ to minimize your risk and ride through periods of volatility.
Reducing your risk in long-term investment strategies
- Diversify asset allocation — Diversifying your assets is one of the most important factors to consider in managing your portfolio. If your goal is to pursue growth, you may want to shift more of your assets into stocks. If your goal is to minimize risk and ride slower growth, you may want to shift more assets into bonds instead. Always make sure you understand the time frame of your investments and the possible risks involved.
- Diversify your portfolio — Diversifying your portfolio is similar to diversifying your assets, but on a more refined level. Let’s say you have diversified your assets and have 80% of your assets in stocks to pursue growth. Among these, you will want to further diversify your portfolio by investing in a variety of stocks across different industry sectors to help minimize loss in the event that one investment performs poorly while others are strong.
- Practice dollar-cost averaging — Dollar-cost averaging is an investment strategy that requires patience and discipline but can pay off in the long run. Under this approach, you apply a specific dollar amount toward the investment on a regular basis. You end up purchasing more shares when the price is low and fewer shares when the price is high, which should help keep the average cost of your shares lower than the average price.
Talk to a ProVise CFP® professional about reducing risk in your long-term investment strategies
At ProVise Management Group, our CERTIFIED FINANCIAL PLANNER™ professionals can get to know you and your current financial circumstances, goals, risk tolerance and personal values to help you develop a plan that works for you. We can also create a written plan for you at a fiduciary standard of care. All our written plans come with an unconditional money-back guarantee. If you are unhappy with your written plan, you can return it to us, and we will refund 100% of the fee paid.
Are you ready to talk to a professional about reducing risk in your long-term investment strategies? Contact ProVise today to schedule a complimentary consultation.