Five Strategies to Increase the Return on Your Investments

When it comes to increasing the return on your investments, a “one size fits all” plan may not work especially if you’re nearing retirement. The returns on investment depends largely on your ability to handle your finances and manage you investment options.

Take a look at simple ways to increase the returns for the money you invest on 401(k) and other investment choices:

Max out your retirement accounts.

You will earn more if you invest more. Make it your goal to increase your contribution percentage every year. Check the limits set by the government on annual contribution.

Plans and limits:

  • 401(k)-$16,500
  • Workplace retirement account- $16,500
  • Workplace retirement plans for 50 years old and above- $22,000
  • IRAs/Roth IRAs(below 50 years old)-$5,000
  • IRAs/Roth IRAs (above 50 years old)- $6,000

Boost your savings account.

Make it your primary goal to set aside at least 20% of your annual income. Park it in “safe” accounts, like:

  • Bank account
  • Certificate of deposit
  • Taxable brokerage

Distribute your assets wisely.

Don’t settle for default investment option of your 401(k) plan and other retirement plans. Review the fund’s prospectus and select a portfolio that sounds good to you.

If you’re over 54 years old, 35% of your money should go to fixed-income investments that generate annual interest. Examples:

  • Bonds
  • Bond funds
  • Cash deposits
  • Real estate commodities

Only 65% of your portfolio can be exposed to stocks or equity. Diversify your money on the following stock investments:

  • Cap stocks
  • Index funds
  • Mutual funds

Every mutual fund company has its own type of holdings.

  • Bonds (government/corporate/foreign)
  • Cap value stocks (small/medium/large)
  • Foreign stocks
  • Money market
  • Precious metals
  • Real estate

Pay attention to investment fees.

Keep the expenses lower than 1% of your finance portfolio. Investment fees include:

  • Account fees from finance advisers
  • Commission for ETF trades
  • Commissions for stock
  • Expense ratios on your mutual funds

Study and use your plan’s features.

If you’re a holder of 401(k) plan, be sure to use its features for your benefit. For individuals who are not good in rebalancing accounts, 401(k) has an automatic rebalancing feature that regularly rebalances your account to check which funds perform better than the rest.

You can also set your automatic contribution increase feature. It allows you to set your contribution rate according to the frequency you choose so that you can grow your retirement funds.

Re-balance your finance portfolio annually.

See which investment works and which does not. You can do it on your own or you may also seek the help of a finance adviser.

Investing is not an easy task. Review your finances and get to know as much information as you can on different investment options that provide great returns. Call your trusted finance adviser today!

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