Often, investors are tempted to stick to a few familiar asset classes in their investment portfolio.
But, what if you’re missing out on several other attractive opportunities?
Which are the profitable asset classes that’ll help you preserve your capital and also maximize your returns?
Let’s discover what a portfolio strategy is and the two types of portfolio strategies. We’ll then check out the eight best portfolio strategy tips, including investing in alternatives like fine wine.
Further reading
- Check out this guide on Wine Portfolio Management and why you need it.
- While you're at it, discover some incredible tips on How to Invest in Fine Wine.
What Is a Portfolio Strategy?
A portfolio strategy is a roadmap that helps you achieve your financial goals. It is a plan that helps you generate the best investment returns.
Investors use different portfolio strategies to maximize their returns. In most cases, this involves investing in various profitable assets such as fine wine and dividends.
What Are the Two Types of Portfolio Strategies?
The two types of portfolio strategies include the active strategy and the passive strategy.
An active strategy is an investment tactic where a fund manager buys and sells securities in response to the changing market conditions.
With a passive strategy, you avoid buying and selling stocks frequently. Instead, this tactic involves investing in various assets that are likely to grow in value over the long term. In this case, you don’t actively manage your portfolio.
So, how do you build the best portfolio strategy?
8 Portfolio Strategy Tips To Grow & Protect Your Investment
Here are the tips for creating a profitable investment portfolio.
- Invest in Alternative Assets Like Fine Wine
- Invest in Dividends
- Invest in Non-Correlating Assets
- Invest in Principal-Protected Notes
- Diversify Your Portfolio
- Buy Put Options
- Use Stop-Loss Orders
- Find a Financial Advisor
1. Invest in Alternative Assets Like Fine Wine
Alternative investments such as fine wine and real assets can bring you the best returns. That’s because alternative investments are usually resistant to market fluctuations compared to stocks.
For example, fine wine produced about 14% annualized investment returns in the last 15 years (despite interest rate hikes, inflation, and stock market crashes.) It also yielded 26% returns during the Great Recession in 2008, while stocks fell by 52%.
So, putting your money into an asset like fine wine can be an excellent investment decision.
But, how do you invest in wine without going through the hassles of middlemen and auction houses?
Check out the Vinovest website to start investing in the finest wine bottles with a few clicks of your mouse. This platform makes it easy for you to buy, store, and sell investment-grade wines from all over the world.
2. Invest in Dividends
You can also protect your investment portfolio and get a higher return by investing in dividend-paying stocks. Simply put, these are stocks of the companies that regularly pay investors a portion of their earnings.
The best dividend-paying stocks (such as AT&T Inc.) can reduce your risk of loss and help you overcome interest rate hikes and stock market crashes.
3. Invest in Non-Correlating Assets
A non-correlating asset isn’t affected by the changes in the stock market. So, investing in it reduces your risk of loss and helps build a profitable portfolio.
Examples of non-correlating assets include fine wine, a bond, currencies, and real assets like commodities and real estate.
4. Invest in Principal-Protected Notes
A principal-protected note is a fixed-income security that offers you a minimum return that’s equal to the amount you invested (principal amount.) However, you’re eligible to get the principal amount only if the security is held until maturity.
So, this investment strategy suits investors who want to protect their principal amount while building a profitable portfolio.
5. Diversify Your Portfolio
Diversification is a core portfolio strategy that can reduce your risk of loss and bring you a higher return. In fact, diversification is one of the cornerstones of the modern portfolio theory (MPT.)
What is the modern portfolio theory?
Simply put, the modern portfolio theory (MPT) is a strategy that maximizes investment returns and minimizes market risk.
Before you diversify your portfolio, you need to have an investment goal, a portfolio construction plan, and a portfolio management strategy.
You should also choose the right asset allocation strategy. For example, you can pick between strategic asset allocation and tactical asset allocation strategies.
When diversifying your portfolio, you can invest in fine wine, an asset class like real estate, emerging markets stocks, and a fixed income product such as a Treasury bond. You can also put your money into a mutual fund or a hedge fund.
6. Buy Put Options
A put option is a contract that allows you to sell a security or stock at a predetermined price (strike price) within a certain period of time.
When you buy a put option for a stock, you expect the stock’s price to drop within a certain period. Should the stock’s price drop, you can sell the put option back to the seller at a higher price.
However, the put option loses its value if the stock’s price rises. So, this strategy might often increase your investment risk.
7. Use Stop-Loss Orders
A stop-loss order is an order you place with a broker to buy or sell a stock when it reaches a certain price. This investment strategy could limit your loss and reduce your risk exposure.
8. Find a Financial Advisor
Figuring out your risk tolerance, setting a realistic investment goal, and making the best investment decision can be tough. So, you could make things easier by finding a financial advisor who can take care of all these for you.
A reputed financial advisor will provide you with the best investment advice and portfolio management tips.
And if you don’t know what to pick between tactical asset allocation and strategic asset allocation strategies, an advisor can help. They’ll often choose the best asset allocation strategy with little investment risk, or one depending on your risk appetite.
Build a Solid Portfolio That Maximizes Your Returns
Building a profitable investment portfolio isn’t complicated - as long as you set realistic investment goals.
In most cases, diversification turns out to be a reliable strategy. To diversify your portfolio, you can invest in an asset class like fixed income products, emerging markets stocks, a hedge fund, or a mutual fund.
While you’re at it, don’t forget that investing in an asset like fine wine is more profitable in the long run, and helps you avoid stock market risk.
So, visit the Vinovest website today to get the best investment advice and build a profitable wine investment portfolio.
