How to Make Your Money Work for You

How to Make Your Money

It may be your dream to grow your business by making investments in the right places or you could simply be contemplating an early retirement. No matter what drives you to make investments, you may have to learn how to make your money work for you instead of it being the other way around.

There are certain rules that you must follow if you do not wish to chase the best deals on a screen before you.

Leave it to the market

Each day there are about 98 million trades that take place across the global markets. In such a scenario it is highly unlikely that there will be a committee which holds discussions about where your money should be invested and make the necessary investments after spotting a stock price discrepancy which works to your advantage.

It may be a good idea to buy global index tracker funds which are diversified and let the markets work for you. The risk of trying to outguess the markets can be greatly reduced by purchasing a diversified basket of global stocks which are linked directly to market returns.

Greater Diversity

The returns that you get from your investments cannot be predicted with certainty. Since the returns are random you shouldn’t allow your financial adviser to make changes to your portfolio on an annual basis. They may do so simply to justify the fees that is being paid to them.

A concentrated strategy may not work favourably for each person. For those investors with sound market knowledge such a strategy may not have risky implications. But as a general rule of investment it is advised that you shouldn’t limit your investments to one stock market or a handful of stocks.

Be in Control of your Money

Wealth management institutes are primarily operating towards maximising the shareholder value of companies. An investor would be mistaken if he or she assumes that maximising an investor’s returns is the ultimate objective of such financial organisations. It is evident from the fact that such companies rarely suggest you to move your funds to a competitor even if it seems to be in your best financial interest.

Therefore, you should try to keep the hidden portfolio costs to a bare minimum and take back control of your money. The costs associated with managing your portfolio should be kept under 1 percent. Throughout the industry the average cost of managing a portfolio lies somewhere between 2 percent to 3 percent. Considering that you are able to save even 1 percent of this cost you will make a substantial amount of money by availing the compound interest that you will receive over the life of your portfolio.

Let’s assume that you have invested £100,000 and pay an annual fee of 2.3 percent to a traditional financial services company. If you receive a 7 percent return on your investment for 25 years, the projected future value of your investment will be £329,332. Deducting the capital investment that you have made the net profit you have earned amounts to £109,912.

However, now let’s assume that you invest the same amount using the services of a low fee portfolio company which charges you 1.11 percent. If the other factors are kept consistent the future projected value of your investment will be £441,601. In this case your profits will be £341,601 which is higher than your profits in the first assumption.

Also, you should protect your investments and wealth by writing a Will using a free Will creator which can be easily found on the internet.

Investments are a long-term strategy

Markets of most economies experience periods where investors get high returns and also those in which they receive low returns on their investments. An investor should be aware that it is an economic cycle and that the stock prices may revive after some time.

Many investors make the mistake of withdrawing their investment when the market conditions seem bleak. This move often results in high losses. The investor may reinvest only after becoming optimistic about the market again. But by the time the market recovers the stock prices may rise again. Purchasing stocks at this time may prove to be expensive. It is quite possible that the investor could have made higher profits had he or she retained the stocks through the downtime.

A good way to keep your emotions in check would be to invest in a portfolio which carries a risk which is aligned with your risk appetite.

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