Two tactics to simplify investing for better returns - The Average Joe

    Two tactics to simplify investing for better returns

    Victor Lei — Head of Research

    October 12, 2021

    Two tactics to simplify investing for better returns

    October 12, 2021

    When it comes to investing, it’s easy to over-analyze — often leading to worse returns.  So what to do if you want to invest money with as little headache as possible?

    Here are two tactics to simplify investing that’ll make life easier:

    Set allocation targets: Instead of worrying about what to invest in, when to invest, and how much to invest — set targets for yourself:

    • i.e. Sample portfolio allocation: 30% in individual stocks, 50% in index funds and 20% in crypto.
    • While the target percentage allocations will vary from person to person, the key is to maintain your target over time.

    This eliminates the need to decide between different asset classes (i.e. stocks, bonds, crypto).

    While some investors like to change their allocation over time, according to Morning Star, portfolios that constantly jump between assets do worse.

    And don’t forget, regular rebalancing is important to ensure that one area of your portfolio doesn’t get too large.

    Hold a smaller number of diversified funds: Instead of trying to build a portfolio of 20-30 stocks, try holding a few low-cost index funds.

    Those looking to simplify even more should avoid thematic ETFs that track specific sectors, a recently popular way to invest in emerging trends. These ETFs tend to run in cycles of boom and bust, while diversified index funds tend to outperform in the long run.

    Recent Posts