Equilibrium: Achieving balance in investments

It is easy to go wrong in investing, and while various trends and philosophies may point to different directions for sure profit, experts believe that the secret to a successful investment is creating a balanced portfolio. With risks aplenty in the investing arena, Forbes offers some advice on how to get to that sweet spot between risk and return.

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Avoid allocating too much for IRA or 401(k)
While an IRA or 401(k) plan offer investors a chance to place their money in stocks that are familiar to them—their own employer, most likely—allotting too much and concentrating one’s assets in one area can be risky, as decline can have a huge impact on the portfolio as a whole.

Try investing in small-cap stocks
The right number of stocks with small market capitalization in a portfolio can sufficiently amp up returns. However, it is best to avoid microcaps as these can be very risky.

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Don’t go all in on stocks
Stocks have very well defined advantages, such as higher long-term returns and dividends that can act as an excellent hedge against rising prices. In fact, stocks are a basic component of newly created portfolios. On the downside, their prices can shift dramatically every now and then.

Don’t go all in on bonds either
Bonds give return, but they can be problematic in an economy afflicted with inflation. It also gets harder to sell them when interest rates begin to rise.

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It takes time and experience to truly grasp the nuances of investing and be considered an expert in the field. It is impossible to create the perfect portfolio, but investors can definitely strive for a balanced one.

JSK Associates is composed of experts who provide valuable investing advice. This website offers more insight into the firm’s investment philosophy.