There are plenty of different ways to invest your money nowadays, but strategies may be more advisable than others for maximizing your returns. So here are the top four investing strategies that you should be aware of.
Diversifying with Index Funds
Index funds attempt to reduce the risks of individual stocks by allowing investors to own a well-diversified list of stocks. Popular choices include S&P 500 and the Nasdaq Composite which feature companies from almost every industry. Index funds can yield great results with reduced risk thanks to your diversified portfolio. Also, they are simple as you won’t need to research individual companies and corporations. On average, S&P 500 has returned around 10 percent annually which is excellent in the long run. Furthermore, these funds can be purchased with incredibly low expense ratios which makes them even more appealing.
Dollar-cost averaging (DCA) is an investment strategy used to reduce risk when buying your investments. Instead of purchasing your assets at all at once at one price, DCA lets you make several small purchases. This decreases the risk that you are purchasing the asset at a higher price than necessary. This is contrary to the strategy of timing the market where investors attempt to purchase assets at the lowest price possible. Of course, correctly timing the market will yield the best results, however, it is practically impossible to predict short-term changes in prices. Therefore, dollar-cost averaging can help minimize downside risk by dividing large investments into smaller equally-spaced payments.
Cryptocurrency is a kind of digital electronic-only currency that is intended to act as a medium of exchange. It’s become extremely popular recently thanks to the possibility of getting incredibly high returns on your investment. In addition, Cryptocurrencies are usually liquid assets that can be bought and sold at virtually any time. However, this type of investment is also very risky since cryptocurrencies are highly volatile. This means you could end up losing all your money by making a bad investment.
Income investing is an investment strategy that focuses on building a that regularly returns cash payouts, usually on a quarterly basis. This can help investors create a steady income stream in the form of dividends. The cash returns can be used for anything or reinvested to purchase more stocks. Dividends can either increase or decrease depending on how well the company is doing financially. Just like regular stocks, income stocks can still drop in value and lead to losses which is the main risk in this type of investment.