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Generating a significant investment income is something that everyone would like to accomplish. While it may seem like a pipe dream, it can be done. Many people live off of their investments or supplement their lifestyles greatly. Here are a few tips to maximizing your returns.
1. Think about Costs
The cost of investing is something that many new investors fail to think about. They think that all they have to do is pick winning stocks or bonds. If that were the case, many more people would be wealthier than they are. One big factor is the amount of money that you have to pay to play. Many brokers today charge fees for everything. They charge you to deposit money, charge you to withdraw money, charge you to trade, and charge you not to trade. By the time you get your investment back, you have lost a large percentage of it in fees. There are low-cost brokers out there that will not charge you as much to trade. If you find one that you like, stick with it. Many people change brokers like they change pants. Every time you start with a new broker, you will lose more money. Finding a good mutual fund that is not as active is a good way to avoid fees as well.
2. Think beyond Stocks
Stocks are the most popular vehicle for investing. However, they are not the only game in town. If you truly want to be successful, it is important to have a diversified portfolio. If you truly want to be diversified, you need to have some other investments in your portfolio. You can diversify with different stocks, but true diversification is present only when you trade other markets. You can trade bonds, options, futures, forex, and commodities. The more things that you get good at trading, the better off you will be. If you have all your money in stocks, what happens if the stock market crashes again? If your money was diversified in other investments, you might be able to stay afloat.
3. Practice First
Getting involved in investing is something that everyone needs to do at some point. With that being said, there is a definite learning curve that will come with it. You should not invest in anything that you do not understand. Try out your strategies on a practice account before you use them in real life. Many brokers offer demo accounts so that you can trade along with the market with fake money. This is a fantastic tool to help you maximize your returns in the long run.
