3 investment lessons to improve your portfolio’s performance

Fsp Invest, 18 Nov. 2013

Tags: investment lessons, portfolio’s performance, portfolio, dividends, low risk investing, trade, overtrading, investing, investment strategy

One of the main reasons for buying and selling shares is to generate decent returns. But this is, of course, no mean feat. But there are a few things that you can apply that should help your portfolio perform better. Read on to uncover three investment lessons to improve your portfolio’s performance…

When it comes to managing your own investment portfolio, there are a few key aspects that you should bear in mind, Phil Oakley in MoneyWeek explains…

Here’s three principals that can help improve the performance of your portfolio.

#1: Don’t trade too much

It’s easy to take a short-term view. This will see you buying and selling lots of shares in a frantic effort to improve your performance.

But this increases the turnover rate of shares in your portfolio. This means the amount you spend on buying and selling shares mounts up.

All this does it increase costs and lower returns. This is why holding shares for the long-term can benefit your portfolio.

#2: Dividends matter

It makes sense to have dividend paying shares in your portfolio. But there is more to it than just looking for shares with a high dividend yield.

So when you look for good dividend paying firms, try and determine future dividend growth as well as the current yield.

This means focusing on the quality of the business: Can it generate enough cash to keep increasing its pay-outs?

#3: Low risk investing can work

Many investors are under the impressions that risk and return go hand in hand. So you only get higher returns by taking more risk.

Yet the fact that for much of the last decade shares have returned roughly the same amounts as government bonds, despite being much more risky, proves this is not always true.

Dividend investing can be less risky than investing in the stock market as a whole. That’s because you are getting a decent chunk of your return from cash dividends, which – unlike a rising share price – the market can’t take away once paid.

So there you have it, three investment lessons to improve your portfolio’s performance.

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