In order to maximize the earnings from investments, it is highly important that the investment portfolio is maintained wisely. You can maximize your earnings and minimize your risk by developing a good investment portfolio. There are a number of factors that must be considered while maintaining an investment portfolio. Following are the things you must consider:
Diversity in the Portfolio
Diversification in the investment portfolio is the best tool to minimize the risk associated with investment. You can diversify your investment portfolio by including a mix of equity shares, bonds, and government securities. It is important that the portfolio reflects investments in different sectors that are independent from each other. This is because companies in a single sector are influenced by the industrial factors at the same time. For example; if a new regulatory requirement requires an industry to increase environmental clean-up costs, this will affect the financial performance of all the companies operating in that industry.
Evaluate the Financial Health of the Companies
Doing proper research from making an investment is highly important. Placing a complete reliance on the analyst reports may not prove to be a good idea at times as there are certain trends that may be overlooked in the reports. You should conduct your own research on the companies. You can use ratio analysis to evaluate the trends in profitability and EPS of the companies. Continue reading