How can you maximize the return on investment for investors? (2024)

Key takeaways from this article

• Evaluate leadership quality:

  Connect with founders and assess their ability to deliver on promises. A strong, trustworthy team often indicates a high potential for investment success.

• Seek independent advice:

  For financial guidance, choose advisors who provide conflict-free advice based on academic research. This helps ensure decisions are data-driven and unbiased.

This summary is powered by AI and these experts

• RJ Mollen (MBA) Leading Business Consultant | Over $30B…
• 🔥 Sebastien Aguilar Learn to build wealth on autopilot -…

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  Investing in a company involves ensuring they fulfill promises for the desired returns. In our extensive network of investors, the consensus over the years is clear — the key factor is the founder and their team. Evaluating their ability to deliver on promises is paramount. Trust is essential when considering a significant investment, whether it's a 10 million USD check for a 30% return or a more substantial investment. In conversations with founders, initial impressions often indicate their capability to handle significant investments, with the first 5 minutes often providing valuable insights into their potential for success or challenges.

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  Risk profile also goes hand in hand with your investment time horizon.For example, if someone needs cash out of an investment and to have made a return on a 100% equities investment in 3 years, that's very risky.However, for someone who is putting money away for example, over ten years (their time horizon), then a 100% equities investment becomes far less volatile and risky venture.It also comes down to a person's money psychology and how they can stomach and handle volatility.

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• 🔥 Sebastien Aguilar Learn to build wealth on autopilot - Evidence-based investing optimized for busy people in Belgium - Retired at 33 - Founder of #FIRE Belgium 8k+ investors community - Donating to high impact charities

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  The 2 main frameworks we use to help investors assess their risk tolerance are:1. The 4 stages of the of the investor life-cycle, from "All About Asset Allocation" by Rick Ferri:- Early savers- Mid-journey accumulators- Transitioners- Withdrawers2. The Ability, Willingness and Need to take risk, from "The Only Guide You'll Ever Need for the Right Financial Plan" by Larry Swedroe.Both these frameworks help the investor ask themselves the right questions to evaluate their personal situation and determine a suitable level of risk capacity.This in turns becomes the basis to determine their asset allocation: the ratio between equity and fixed income in their portfolio.

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  This is my current research topic. Optimizing returns depends on one's ability to surf the boom and bust waves of different asset classes. To do that repeatedly over long periods of time one has to acquire the skill of technical analysis. But to choose the asset class and its constituents therein, one must also have an adequate knowledge of Fundamental Analysis.Currently, my preferred asset classes are stocks, bonds, liquid funds, Gold and Silver ETFs. As the stock market gets higher, I book profits and shift to other sectors which are beginning their up cycle, while reducing overall exposure in stocks. Achievement portfolio wise is 11% so far with visibility of 15% by yearend. I am unable to expand as this format allows 750 characters.

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  See Also

  How to Increase Position Size The Right Way - Trade That SwingD-VaR position sizing - Wealth-Lab WikiPosition Sizing - 7 Steps to Safer Investing | Invest-Safely.com

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  Evaluating the property, improving it for maximum return of investment. Carefully choosing our tenants and working with them as partners in their home tenancy; never letting issues or concerns get out of control. Having the knowledge to evaluate the property on a continuous basis, know the local market conditions, current rental rates, local and state issues, laws, concerns that might have an effect on my Owner's investment.

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  Evaluating is simply measuring to see if you are on target to do what you set out in the first place. So, for example if you invested $10 000 and are looking to end on $20 000 in 5 years’ time then you would need to achieve a return of 15% pa compounding.Obviously you would have chosen investments in the first place that could achieve such when you set out to achieve the target. Now it would be just checking to see if they perform accordingly. We must however be cautious that we do not just chip and change because they did not achieve their target in a particular year or six-month cycle. However, we must keep an eye on them to ensure that they are not underperforming according to their peers as this might indicate for you to sell.

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• 🔥 Sebastien Aguilar Learn to build wealth on autopilot - Evidence-based investing optimized for busy people in Belgium - Retired at 33 - Founder of #FIRE Belgium 8k+ investors community - Donating to high impact charities

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  In my experience with index investing, all you need to do is to understand the potential long-term returns of each asset class. Usually, looking at long-term historical returns (sometimes adjusted for P/E ratio) is a good proxy for what can be expected going forward.Regarding evaluation and monitoring of your portfolio, with long-term index investing, there is very little do do. That's because we design portfolio to withstand any type of market conditions and we simply hold through the ups and downs without changing anything. This has been proven by countless studies to be more effective (and provide better returns) than active management.We review portfolio asset allocation only when there is a big change in risk tolerance.

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• Jeetendar Peswani,CFA Finance Educator | CFA Charterholder | CFP Professional

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  Post-tax returns take center stage in investment decisions. We should be choosing tax-efficient investments that can help to maximize ROI.Excessive fees from buying and selling can significantly impact your net gains. By minimizing transaction costs, you retain more of your profits, enhancing the overall return on your investments. Transaction cost and taxes can reduce your net return significantly.Reducing them can help you achieve a higher ROI.

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  An interesting subject indeed. Any good finance person would just look at the result. With or without the implication of taxes and various costs. I am certainly saying consider them but at the same time not to the detriment of your actual best return.Maximizing returns is not necessarily about cutting costs but rather understanding my best result with or without them.

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• Mike Garcia, Pharm.D 🪙 Helping Pharmacists Crush Credit Card Debt and Break the Chains of Paycheck to Paycheck

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  Always be wary of fees and costs up front. Fees are guaranteed but returns are not.Fees, like returns, compound over time draining your future returns over the long run.Also checking the vehicle structure to make sure you can take advantage of long term capital gains taxes will save you in taxes in the future.

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• 🔥 Sebastien Aguilar Learn to build wealth on autopilot - Evidence-based investing optimized for busy people in Belgium - Retired at 33 - Founder of #FIRE Belgium 8k+ investors community - Donating to high impact charities

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  It is indeed important to optimize costs and taxes as that is one of the only things (alongside asset allocation) that we can control when investing in the stock market.What we like to do is design investment portfolios optimized for long-term returns and with minimal tax and fees.Buy and hold low cost index funds via a low-cost online broker is often the best solution over here ( in Europe).

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  Yes, the more you know the better your decisions and therefore the better the outcome.There is a lot of advice in the market. However, the more you accumulate will assist you to make the correct decisions. It is essential though to speak to experts in the field as you would not approach a gynecologist if you have dental problems.

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• 🔥 Sebastien Aguilar Learn to build wealth on autopilot - Evidence-based investing optimized for busy people in Belgium - Retired at 33 - Founder of #FIRE Belgium 8k+ investors community - Donating to high impact charities

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  As index investors, this is usually not necessary as we simply buy and hold the entire stock market, without trying to beat it. This approach already gives us better performance than 90% of actively managed funds out there, with very little work :-)

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• Ovidio Sardinas Loan Originator with Motto Mortgage Homewise

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  Leveraging your network and expertise is essential for maximizing ROI in investing. It's about strategically using your connections and knowledge to access better information and opportunities. Networking with investors, advisors, brokers, and experts allows you to gain diverse insights and recommendations, enriching your decision-making process. Simultaneously, capitalizing on your own expertise by investing in familiar, passionate areas gives you an edge. It's not just playing to your strengths; it's smart investing. Continuous learning and skill updates are also vital, keeping you ahead in a constantly evolving market. This approach blends external resources with your internal acumen, forming a robust strategy for investment success.

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• Ovidio Sardinas Loan Originator with Motto Mortgage Homewise

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  Being flexible and adaptable is a key to maximizing ROI, especially in ever-changing markets. It's crucial to stay open-minded, avoiding rigid or emotional responses to investments. Embrace new ideas, strategies, and tools to enhance returns, and be prepared to face and learn from challenges and setbacks. This mindset isn't about reckless risk-taking; it's about calculated risks. Knowing when to cut losses and move on is as important as seizing new opportunities. Flexibility in strategy and adaptability in approach are not just tactics; they are essential qualities for long-term investment success.

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• 🔥 Sebastien Aguilar Learn to build wealth on autopilot - Evidence-based investing optimized for busy people in Belgium - Retired at 33 - Founder of #FIRE Belgium 8k+ investors community - Donating to high impact charities

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  And when seeking guidance and advice, be sure to find experts who are giving independent advice (no kick-back commission or inducements, no AUM model, it's best if you pay a fixed fee for advice) to reduce the conflicts of interest. Find also someone who bases his/her advice on solid peer-reviewed academic research and statistics, and not on short-term forecasts.Ask questions. Ask who makes money out of your investments and whether their advice or service isn't compromised by their business model.Be sure to check what the science says about investing. Check the evidence. I recommend looking at:- SPIVA scorecard- Morningstar Passive vs Active Barometer- DALBAR Quantitative Analysis of Investor Behavior

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• Ovidio Sardinas Loan Originator with Motto Mortgage Homewise

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  Seeking professional advice and guidance is a vital step in maximizing ROI. It's about recognizing your own limitations and seeking expertise to complement your strengths and weaknesses. Consulting with financial planners, advisors, and managers provides tailored strategies and nuanced insights, enhancing decision-making. Additionally, feedback and support from peers, mentors, and partners are invaluable. They offer diverse perspectives and experiences, aiding in your growth and improvement. Embrace humility and collaboration rather than isolation or arrogance. This approach not only fills gaps in your knowledge but also builds a robust support network, crucial for sustained investment success and personal development.

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