According to InvestmentNews, 48% of Americans don't own any investment assets. The primary reason cited is a lack of understanding of their options. However, this issue may affect more than non-investors; even those with investments may struggle with effective portfolio management.
Regardless of which group you belong to, our team here at PMI Music City in Nashville, TN, has your back. Read on for our top investment portfolio tips and financial management strategies.
Determine or Review Your Risk Tolerance
Risk tolerance is the degree of risk an investor willingly takes based on the volatility of an investment asset. Investors typically fall into one of three primary risk tolerance levels.
First, there are the high-risk or "aggressive" investors. They like investing in assets that generate high returns but are highly volatile, meaning there's a lot to lose if they crash. Examples include stocks, exchange-traded funds (ETFs), and equity funds.
Next, we have low- or conservative-risk investors. Such investors often prefer highly liquid assets with consistent, albeit lower returns. Examples are bonds, bond funds, and rental income properties.
Third is moderate risk. Moderate-risk investors like mixing high-risk assets with low-risk investments.
Determining and reviewing your tolerance is crucial for adequate diversification and risk management in investing, as how well you tolerate risk will influence your earnings.
Master Asset Allocation Techniques
Asset allocation refers to how much of your portfolio you invest in each asset class (often expressed in percentage). For example, it could be 25% in stocks, 25% in ETFs, 25% in bonds, and 25% in Nashville rental real estate investment properties.
Asset allocation is crucial because you don't want to "put all your eggs" in one basket. By dividing your investment funds across different asset classes and subclasses, you can lower your risks of losing too much when one or more of your investments plummet.
Diversify and Expand Your Portfolio
Diversifying your portfolio means investing in different assets within various classes.
For example, suppose you want to expand your existing portfolio by investing in real estate, which, according to 36% of surveyed Americans, is the best long-term investment, as reported by CNBC. Diversification, in this case, means investing in various real estate assets, such as:
- Residential rental properties
- Vacation rental properties
- Commercial rental properties
Diversification further reduces investment risks. It can help counter the effects of a negative asset performance with a well-performing one. With a diverse portfolio, you can spread and balance your potential losses and gains.
Ready for Expert Help With Real Estate Portfolio Management?
Effective portfolio management starts with determining and reviewing your risk tolerance. Then, implement asset allocation and diversification tactics. They can help lower your risks while allowing you to enjoy the rewards of well-performing investment tools.
If you need help with real estate property investments in Nashville, look no further than PMI Music City. We're a full-service property management company specializing in real estate brokerage services. With our expert local knowledge, skills, state-of-the-art technology, and support from PMI, our parent company that has been perfecting the property management sector for nearly two decades, we can help expand and diversify your portfolio and manage your real estate investments.
Speak with us today for a free consultation!
