Strategies for Growing Portfolio Returns

Many people who hear the sentence “Manage your investment portfolio” may feel it’s complicated in practice. Actually, it’s quite simple such as, balancing asset allocation, no heavy investment in scattered assets, investment portion fits personal goal, or moderate flexibility, etc.

Additional to those principles, investors should look for ways to earn higher returns or attempt to set a strategy to improve returns. An important tip to do that is to choose investment assets that fit your investment style.

For example, select Stock or Bond or both, invest in a large or small company, choose active or passive management and so on. More significantly, rebalancing portfolio in line with situation which means assets have an impact on portfolio returns in general. Therefore, investors need to understand each type of asset and compare its pros and cons before making investment decision.

Stock & Stock Mutual Fund

Direct investment in stocks generates high returns and flexibility, adjusts investment strategy actively but brings high risk. More, it’ll take time to catch up information and will need extensive investment experience. Even though stock market is rising but not all stocks are upward. Thus, investors should allocate financial investment portion in stocks and money saved for other goals in good proportion. For example, allocate investment in Stock Mutual Fund for diversification because an expert can supervise and help diversifying several stock investments to increase security in case of market volatility.

For Direct investment in stocks, investors should select stocks with a solid portfolio foundation and growth potential under proper value. For Stock Mutual Fund, investors should choose from investment policy whether it aligns with their needs.


Large stock vs. Medium & Small stock


One factor affecting stock investment is to select stocks in accordance with the business volume in reference to market cap which includes large, medium and small stocks, and then choose an investment in preferred group. If investors are interested in large stock, they’ll consider it as stocks of a huge business that has been operating for years with high growth and expansion, stable market shares, and their stocks are ideal for long-term investment and generate dividend returns to investors.

For medium and small stocks, they’re viewed as lower solid foundation than large stock. As the analysis about that matter is not much available, investors tend to choose large stock when making decision. In fact, if they pick medium and small stock properly, especially stocks with good foundation, their investment will work out. Peter Lynch said in his book ‘Beating the Street’ that investment diversification in fast growth stocks is only one way to help investment port win in the market. That means if investment port consists of a good portion of medium and small stocks, its returns may possibly win in the market.



Value stock vs. Growth stock


The characteristics of Value stock include a high return rate from dividend yield, low Price-to-Earnings (P/E) Ratio, and low Price to Book Value (P/BV) Ratio.

Investment in Value stock will create sustainable returns in long term with low volatility when comparing with investment in other stock type, matching with investment situation during economy shrink or crisis. That means investors foresee and believe that a level of uncertainty is high, so investment in Value stock gains high popularity accordingly.

Value stock is mostly an investment in sustainable business operations and the business performance hasn’t changed regarding to economic fluctuation. More, the business is highly competitive, grows consistent and continuous profits, holds acceptable and unbeatable brand status. Most significantly, the current stock price is lower than actual business value.

Growth stock offers a remarkable and faster growth than other stock type whether its asset growth, income and returns are at higher level than average market. The reason investors should maintain Growth stock in their ports is that high returns still remain high while stock holding period is not long.

Growth stock is suitable for investors with short-term investment period (less than 1 year) and a high tolerance to risk from investment volatility because performance or investment issues always play a part in price adjustment of this stock.

Active Management vs. Passive Management

Investors who choose Active Management will need to study and analyze information in order to invest in benefit assets during each economic period. The focus is on assets at price cheaper than actual value, and sell assets at price more expensive than actual value under highly expected returns. At the same time, investors are able to adjust port all the times by observing the right timing, holding assets and cash to fit economic environment in each period of time.

Passive Management focuses on investment that replicates a specific benchmark or index to achieve return rate close to changing rate of reference index. That means investors must accept investment returns in respect of reference index under market conditions. Therefore, the risk level is similar to that reference index.

Asset Allocation

Asset Allocation is a plan to allocate money for investing in variety of assets to achieve investment goals, by considering return rate expecting to gain from each asset, in order to determine the investment ratio aligning with risk tolerance and investment period.

If investment assets are efficiently arranged, investors can create returns on investment better than investing in any particular asset. The price of each asset type will respond to changes in different economic factors, and the timing spent for price adjustment will also vary. As a result, investment in several asset types at an appropriate level will help minimize risk from big loss simultaneously.