Building A Low Risk Portfolio For Long Term Wealth
Building wealth can be achieved by investing in low risk assets for a long term gain. The types of low risk purchases may include selected businesses with a competitive advantage, investment properties in the more regional areas, and other assets that can be used to diversify a portfolio. The following are several strategies that can be used by the successful investor:
Strategy One: Low Risk Investments
Finding low risk investments can be a challenge. There are various methods that have been used recently. Some successful investors have chosen to purchase existing businesses that have a long operating history. Businesses that produce necessary goods and services are more likely to last throughout any economic turmoil. Distressed businesses in distressed industries may be purchased at a less expensive price. Some emerging industries are good investments.
Strategy Two: Investment Property
Purchasing investment real estate can be profitable. New areas that are being developed can be future profits for an astute property developer. Newer properties that are purchased have builder warranties and fewer repair bills. Tenants tend to pay more for newer property in commercially developing areas. An investor who is interested in renting out real estate may need to diversify in order to meet the demands of the new type of tenant. Tenants today are demanding, and a real estate owner may need to have apartments, houses, and townhouses available for rent. Newer properties have a tax benefit of depreciation over a forty year period.
Strategy Three: Risk Profiles
Risk profiles can be calculated for each type of investor. Some investors need a portfolio that continues over a number of decades. Access to the invested monies is important for some account holders. The goal of the various investment accounts needs to be clearly defined.
Investment Mistakes to Avoid
A new or seasoned investor can make mistakes. There are certain methods that can be used that help to avoid several of these. The following tips will explain how an investor can achieve certain wealth goals and use the safest type of strategies:
Tip One: Understand the Investment
A good investor understands the investment and the market. Investing in something that is not thoroughly understood can be a mistake. Just liking a property or a company may not be enough reason to invest hard earned money in this type of transaction. Liking a house may be a first step. The neighborhood needs to be explored for weather problems, flooding, crime statistics, airport noise, air pollution, and other important real estate factors, for example. Each of these investment problems can turn a good start in a new investment into an ongoing problem. Real estate locations may not rent at all if the tenants find that the property cannot be pleasantly lived in. Doing the important homework before any purchase is critical. Buying a business can bring in profits for the new owner. Finding out that the area of business is part of a new rules and regulations change can close the business doors quickly. Buying businesses that produce low risk necessity products can help to safe guard against any future issues, but at the same time they say nothing is future-proof. Competition needs to be assessed as well.
Tip Two: Patience
Buying a new business or a new house can create wealth over the long run. The business venture needs to be purchased at the right time, and the location of the house is critical. Patience is important for any long term low risk wealth strategy. Profits are gained over decades, and turning over a portfolio frequently can defeat the purpose of this type of low risk strategy.
Tip Three: Market Timing
An investor who wishes to gain low risk long term gain will need to show patience and timing. Market timing is frequently used for stock purchase investments, for example. The technology era ushered in many new wealthy stock owners during a propitious time for the computer industry. Those technology stock holders who waited throughout the development years were rewarded with long term stock gains.
Safe wealth creations are possible during an unpredictable economy. The successful strategist can begin a portfolio with investments in existing businesses with long operational histories. Rental properties need to be selected for a new demanding tenant. These valued wealth factors can take an investment fund and turn it into a profitable portfolio. Businesses need to deliver those goods and services that are necessary for the general population. Properties purchased should avoid the many location pitfalls that can occur. The patient investor needs to understand that the return on investment may take several years or longer. The account values for the diversified investments can rise and fall several times during the course of an investment plan. Careful and deliberate planning is important.
Daniel Johns is a professional financial advisor who writes for Blueprint Wealth – a leading Financial Planning company in Perth, Western Australia offering tailored wealth creation strategies.