The past six years have been relatively lucrative for investors. In the years to come, though, things are going to be different. The bull market for the past six years helped make many investors feel like absolute winners, but this year things have begun to change.
There’s been a number of drastic swings in the stock market in the past few weeks. Even though it seems like a completely volatile investment, the Standard and Poor’s 500 stock index has returned more than 200% since March 2009.
Bonds have also provided a 34% gain during that same period. So what about moving forward? Here are three investment strategies that can make for better returns in the years ahead, during a market that is expected to be volatile in the near future.
1. Don’t Abandon Your Investments
Even though stocks are considered expensive, they are still extremely valuable. Even though the stock market itself might’ve lost some value during the recent volatility, they are still one of the best long-term investment you’re going to make. At the moment, though, certain analysts are predicting that the average annual gains may range between 5% and 8%, as compared to historical averages of about 10%.
Just because it’s not going to gain those historical averages doesn’t mean stocks are not a worthy investment. 5% and 8% are still strong returns.
The best thing to do right now is to look at your portfolio and make sure it’s going to be optimal for your retirement plans.
2. Diversify Your Investments
There are many opportunities within the United States as well as around the world to make valuable investments. It’s a good idea to begin putting your money into a wide range of investment opportunities.
You may find foreign stocks tempting because they are bargains, but many foreign economies are reliant on China, the US, and the other major economic powerhouses.
It’s a good idea to hold 20% to 30% of your stock allocation in foreign equities. You may also want to consider 5% in emerging markets.
3. Focus on Bonds for Safety Rather Than Income
It’s a good idea to keep some of your investments in bonds, but not as a focus for generating wealth and increasing income, but instead for safety reasons.
If you are on a fixed income, you might not have many options and the interest rates are as low as they’re ever going to be. While this may seem like a risky investment in the short term, over the long-term bonds continue to remain strong.
Just don’t expect bonds to return what they have done historically, which is about 5%.
If you’re focused on maximizing your return on investment, you need to take certain risks. You need to weigh those risks with regard to what you’re comfortable doing and determine whether it is something you want to consider for the future.
When you rely on these strategies, you should end up with better returns on your investments in the future.