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Thursday, May 16, 2013

Make money from investments in 2013

ROI is not always guaranteed despite lower risk investingBy Keith Barrett

Investing money is a rather simple process, but the art of doing it successfully is something altogether different. Many people look at successful investors and believe that it will be possible to match such stellar achievements.

The reality is, however, that things aren’t quite as simple as they seem. The truth is that, if it were incredibly easy to make lots of money from investing, then everyone would be doing it. Instead, plenty of people find that investments lead to a loss of money, or to steady returns. That’s a long way from the glamorous hopes that you may well have at the present time.

Despite this seemingly bleak introduction, I would urge you not to despair! I believe that it’s perfectly possible for you to make plenty of money this year. It may be the case that you will struggle to double or triple the total value of your investment portfolio, but it’s sometimes useful to have a small dose of reality.

So how can you go about being successful? What sort of strategy should you adopt? Read on to find out more.

Understand the risks involved

One of the biggest mistakes that amateur investors make is to assume that all will go well and that they will have no problem being successful. This level of over-confidence is almost always a recipe for disaster.

The reality is that all investments have a certain level of risk attached to them. If you believe that you have found a certain winner, then the chances are that you simply haven’t considered it correctly.
When it comes to investments, you need to think about that critical balance between risks and rewards. In general terms, you’ll find that investment opportunities that appear to offer the greatest rewards will also have significant associated risks. There’s often a very real chance that you may end up losing money.

Although this needn’t always be the case, it’s something that’s worth considering.

Take a balanced approach

That ghostly presence of risk should cause you to think about the best approach to meet your requirements. Many professionals recommend the idea of maintaining a balanced portfolio of investments.

The basic idea here is that you can buy some shares in a company that you view as something of a risk. If you do so, however, then you should also be looking to balance that risk. You might achieve that by investing in a boringly stable company, where very little change might be expected in the near future.

It goes without saying that achieving a balanced portfolio is more difficult than it may sound. Once again, it involves having an awareness of risk.

In practice, most of us will find that our portfolio leans heavily in a certain direction. That’s not a problem, as long as we are aware of the associated dangers.

Think about what you are trying to achieve this year. Are you aiming to rapidly increase the value of your investments? If you are, then you’ll simply need to accept that there’s likely to be a real risk that things may go badly. The alternative is to build in a slow and steady manner. You need to find the right approach for your needs.

About the author: Keith Barrett is interested in the approach taken by Nevsky Capital and other professional investors. He believes that most of us can learn, by understanding how the professionals make decisions.

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