The basic objective of an investment portfolio is to maximize gains and minimize losses, and some key strategies and tactics exist that may help do just that.
In simple terms, compounding pays you interest on your reinvested earnings. This growth is often referred to as the "rolling snowball effect," and it occurs over time. In fact, the more time, the better. The longer you leave your money working of you, the more interest it can accumulate, and the greater possibility that compounding continually works in your favor.
Portfolios should be reviewed on a regular basis. Money invested offers the potential of a significant return over time. Investments involve risk, including loss of principal amount invested. Past performance is no guarantee of future results.
Ride out market volatility
If there is one certainty in investing, it's that the financial marketplace can be volatile. And it is a factor out of an investor's control.
Yet, over many years, a commitment to ride out market volatility - endure short-term pain for long-term gain - can prove to be a rewarding strategy. For many, this seems difficult to do. They see some short-term losses in value in their portfolios and want to take action, perhaps pulling money out.
What we need to remember is that these short-term drops are "paper losses," and experience shows that staying invested is the thing to do. Over time, the longer you remain invested, the more likely you'll be to reduce risk and to improve your opportunity for gains. This is not a guarantee, of course, but history clearly shows it to be a sound approach.
The type of investment we are describing here is a diversified portfolio designed for long-term results to meet long-term goals. Diversification does not assure a profit or protect against loss in declining markets, and diversification cannot guarantee that any objective or goal will be achieved.