When you put your money into something – say gold or real estate – you have one major goal: Getting the most in return. Regardless of your investment portfolio, setting the return as your major investment objective is fair. But there is a catch. Investment is not a matter of a flat line where everything goes as planned. Instead, it is a series of ebbs and flows. As you put your money into an investment portfolio, uncertainty is always there.
Essentially, one makes his investment portfolio diverse, by investing in long and short terms, with the optimism of earning more. High return means more profit, savings, and of course, more investments in the future. To achieve these wide sets of milestones, most investors hold their stocks and wait until the stock market soars. However, awaiting the high price for your stock is more like waiting for the unseen. It may happen or may not.
There are Pros & Cons of Every Investment Portfolio
Nonetheless, there is a concept in investing known as Predictable Returns. In this approach, you are not blindly putting your money and holding your stocks. Instead, you analyze the competitive market and diversify your investment. This way, you look after the investment portfolios where you have put your money and wait for the return. Not blindly, but strategically.
That is why it is worthwhile to analyze every aspect of your portfolio before investing in it. Similarly, it is a sane idea to look at the future of your investment. This means you analyze that the money you are investing today will be beneficial and profitable for you in the next five years. Real Estate could be a good example here.
The American Housing Marking is holistically unpredictable. If the prices of homes go up in the U.S, the price comes down in no time. They call it a bubble. So, putting your money into an investment portfolio like Real Estate is risky. Not only because of the unpredictability but the unseen price fall that lies ahead. On top of that, it functions at par with the current inflation. In other words, once the inflation rate increases, the housing market goes down and vice versa.
Rising Interest Rate
With all the risks and uncertainties aside, there is also positive anticipation of investment. That is, certain external factors would contribute to the higher rate of your stock.
Rising interest rate is one of them. If the interest rate rises and you have a decent list of bonds and stocks, you will likely make a great return. Thus, the interest rate is another factor that you will need to keep track of. If the price of your bonds goes down and the interest rate goes up, you will still be able to make great returns on your stocks.