Making effective market investments can seem impossible at times due to its high volatility and unpredictability. You need to be daring and take risks, despite the ever-changing nature of the market, you need to be daring and take risks as an investor.
Jeremy Wien, Managing Director of Moo Point Capital Management, had some encouraging words to say about the current market: ‘Beating the market over a lengthy period of time is certainly a challenge, but it’s far from impossible. I think it’s more doable in non-equity strategies that may be more willing to accept a higher volatility of returns. A long-only equity strategy—especially one that carries asset management fees and performance fees—is highly unlikely to beat the market over the long run.’
As Jeremy states, beating their market is far from impossible. However, it does require you to be strategic and spend the time and energy learning more about the market. Below, we’ve covered some insights and strategies for those of you who are astute investors and want to beat the market.
Diversifying Your Investments
As any reputable investor and they will tell you that one of the secrets to their success is diversification. By investing in a unique range of assets, you can diversify and expand your portfolio to build resilience against the volatile market and enhance your income.
Diversification enables you to catch investments at their best points during the market cycle and reduce the risk of financial losses or poor asset performance. Aim to invest in a diverse range of industries and asset types to create the most diverse portfolio possible.
Focus on Long-Term Goals
Many first-time investors make the mistake of focusing solely on short-term investments and making a ‘quick buck’. Whilst you might see great returns on your investments initially, ignoring the long-term sustainability of your assets is a huge mistake that could lead to future financial losses.
Adopting a long-term approach to your market investments is vital for beating the market and avoiding falling victim to acute and volatile fluctuations. Although it’s more time consuming and requires more patience, looking at your investments through a wider lens and purchasing assets that may not necessarily make immediate returns but will certainly increase in value over the years is key for becoming a successful lifelong investor.
Consider your Risk Tolerance and Assessment
Risk tolerance refers to your willingness to take risks and potentially lose money when investing in a volatile market. Understanding your risk tolerance is key for making smart and well-informed decisions when purchasing new assets.
Whether your risk tolerance is aggressive, moderate, or conservative, you will need to keep this in mind when you’re analysing market trends and changes. At the same time, you must perform an in-depth risk assessment and calculate ROI before purchasing new assets to ensure they complement your existing portfolio and will provide high returns.
