Investment is inseparable from the name of risk. The expression of a large investment return accompanied by a large risk of loss (high return, high risk) is certainly firmly entrenched for some investors. Therefore, a number of investors have investment portfolios in order to minimize risk and achieve optimal returns as much as possible.
What is an Investment Portfolio?
In simple terms, the notion of an investment portfolio can be defined as a collection of investment assets, which can be in the form of property, deposits, stocks, gold, bonds, or other instruments.
This collection of assets can be realized if an investor diversifies his portfolio. An investor diversifies his portfolio to get more optimal profits and at the same time reduce investment risk. Why would an investor diversify a portfolio? In every investment instrument, there will always be a level of uncertainty.
Through diversification, an investor spreads uncertainty or risk to various investment instruments. As an illustration, investor A only invests in gold. When the price of gold falls, the entire value of the investment it owns goes down.
At the same time, investor B invests in more than one asset, such as gold and stocks. When the price of gold falls and the investment in its shares goes up, the value of the investor's investment does not decrease too much.
How to Deal with a Minus Investment Portfolio
In the midst of a pandemic like today, market conditions become uncertain and often make the investment value minus. So, if this happens to the portfolio that you have built, how should you deal with it? Below, Magic will provide some tips and ways to deal with a minus investment portfolio.
1. Remember Your Initial Investment Goals
When you start investing, surely you already have an investment goal, right? There are many investment goals that you may have, starting from preparing emergency funds, retirement funds, traveling funds, and so on.
Now, when you face a declining investment value, try again to remember your initial investment goals, whether these goals can be realized in the short term or long term.
When your investment goals are long term, they generally have great value. So if there is a decline but it has not reached the timeframe, then don't panic and stay optimistic.
2. Don't rush to withdraw funds
If the value of the investment has decreased, do not immediately panic and rush to take action to withdraw funds. Because it could be that the decline only occurred in a short time and is likely to rise again.
If you remember the long-term investment goals, then you don't need to disburse funds right away because there is still the potential for an increase in value in the future. So, make sure to keep in mind your investment goals and the timeframe for achieving your investment!
3. Opportunity to Add (Top Up) Funds
When a portfolio declines, don't just think about securing funds by withdrawing them. In fact, this could be your opportunity to increase your investment.
For example, currently your declining investment portfolio is stock investment, so you can try buying other investment instruments such as money market mutual funds with lower risk. That way, you can keep investing and improve your investment portfolio by diversifying your investments.
4. If Possible, Switch Some
To reduce the risk of loss, or if you want to use the saved funds in the near future, you can try switching the product to a more stable instrument.
For example, you have an equity mutual fund investment, and you want to use some of the funds in the near future, then you can try switching your investment to a lower risk investment such as a money market mutual fund.
An understanding of this investment portfolio is a must for investors or potential investors considering the wide variety of investment instruments available. By understanding your investment portfolio, you are expected to be able to maximize your investment with various alternative types of investment instruments.
Well, for those of you who want to build a more stable portfolio, Magic recommends diversifying your investments by choosing several types of investments with different risks. For example, you can split your portfolio into a portfolio of stocks and money market mutual fund instruments.
Where, you can use stock instruments for long-term goals with big profits and big risks too. While money market mutual fund instruments you can use for short-term financial goals with small risks and returns.
Considerations Before Determining an Investment Portfolio
Well, before you decide to build an investment portfolio, below are some things you should consider.
1. Investment Objectives & Term
Before starting to invest, make sure you first determine the goals and investment period. For example, to prepare a retirement fund in 20 years, or prepare a wedding fund in 3 years, and so on.
By determining your goals and timeframe, you can easily raise money through investments and choose which investment products are suitable for that time period.
2. Capital
Before building a portfolio, double-check how much capital you have for investment. With limited capital, there are fewer stock options that you can buy.
For example, when you only have $100,000 in capital, you can start investing in mutual funds in Magic with a minimum investment of $10,000, or investing in shares in Magic with an initial capital of $100,000.
However, if you have a large capital, maybe your investment can be even higher, such as playing big stocks or even buying property to rent back.
3. Know Your Risk Profile As An Investor
An investor's risk profile is divided into three, namely conservative, moderate, and aggressive. Where, conservative investors tend to avoid risk and choose safe investment products.
Meanwhile, moderate investors have moderate risk tolerance and aggressive investors have high risk tolerance because they pursue large returns. Usually the greater the return on an investment, the higher the level of risk.
Diversify Investments Through Magic
To keep your investment portfolio safe and not high risk, you can start diversifying through the Magic investment application or platform.
Through Magic, you can choose various types of investments, from stocks to mutual funds. In Magic, you can choose from a variety of company stocks in many industries, from the financial, retail, health, manufacturing, and so on.
In addition, you can also choose various types of mutual fund investments, ranging from money market mutual funds, fixed income, mixed, to stock mutual funds.
Well, this type of instrument is perfect for you beginner investors. Because you will be assisted by an investment manager in managing your investment.