Managing an investment portfolio is often considered an equivalent of managing a business. Though
professional advice is always helpful, payments of professional investment management increase costs of
investment and thus, cannot guarantee higher returns. It is the investor who can understand their own
personal priorities and manage the investment portfolio better than anyone else. Following some key
principles and steps, beginner investors can build and manage an investment portfolio from scratch and
ensure return maximization without the help of any paid professionals.
Ways to Help Improve Your Portfolio Holdings
The successful management of the portfolio holding requires knowledge, proper planning, a proactive
approach, and disciplines. By following a few consistent principles, the investor can improve the returns and
reduce the risk of the portfolio holdings.
– Setting up investment philosophy:
To protect the portfolio holding from emotional biases, the investor should set up an investment philosophy
based on personal beliefs about the stock market, market performance expectation, return requirements, and
risk preference. In this case, the investor can set up the philosophy regarding whether to be a long-term
investor or a short-term trader. A written Investment Policy Statement (IPS) can be very helpful in setting the
philosophies and making a plan for investment activities.
– Understanding the portfolio:
The investor should invest only in the assets that the investor can adequately understand. It is necessary to
understand the nature and performance of the assets to analyze the market condition and make proper
decisions. The P2P platforms are great sources of information and resources to learn about different
investment classes so that the investor can choose the most preferable assets for the portfolio holding.
– Choosing investments based on risk preferences:
Different investment assets have different levels of risks and returns. The investor should select the asset
classes based on personal preference on risks and returns such as risk-averse, risk-neutral, and risk-seeking
characteristics of the investor. For example, if the investor is risk-averse, it would be effective for portfolio
management to choose P2P investments at lower risks and stable returns.
– Diversification of the portfolio:
Diversification is the key to control the risk of investment because it allocates risks and returns to all assets in
the portfolio holding. Henceforth, the investor should spread the risk by selecting different asset classes
across sectors, industries, companies, and locations. This way, the loss from one asset can be offset from the
gain from other assets and thus, reduce the overall risk of the portfolio holdings.
– Performing research before investing:
The investor needs to analyze the securities properly before buying them to ensure finding the best
investment opportunities. In this case, the investor should analyze and find out the undervalued stocks and
securities for higher return investments.
– Rebalancing the portfolio regularly:
With the changes in the market conditions, the selected asset allocation becomes outdated. For this, the
investor needs to rebalance the portfolio by buying new shares or selling existing shares when the market
goes up or down to restore the initial value of the portfolio.
Peer-to-peer lending, or in short P2P lending, is also known as the crowdlending method under which
creditworthy companies can directly borrow from individuals. Thus, P2P lending has become a popular
investment opportunity for investors to ensure value optimization of their portfolio holdings. P2P lending
provides high returns that increase the overall portfolio value. Moreover, the financial institution facilitating
the P2P platform may ensure that all lenders under that platform are creditworthy by providing credit analysis
and ratings to reduce the risks. Since low-risk investment alternatives like bonds and savings accounts cannot
provide an attractive return, by adding P2P lending into an investment portfolio, the investor can allocate
a part of the investment for a higher return at higher risk. Thus, the investor would be able to maximize the
portfolio return by using P2P lending.
Lendo, for instance, understands the differences in investment needs and expectations of different investors.
Hence, Lendo is the first financial institution to introduce a peer-to-peer (P2P) invoice financing platform in
KSA offering different investment opportunities with returns of up to 24% per year along with invoice
financing for small and medium-sized enterprises (SMEs). More information about Lendo and its services
is available on the website here.
To improve portfolio holding and managing the portfolio like the professionals, the investors need to grab the
best investment opportunities. Therefore, beginner investors should carefully analyze all investment
opportunities available in the market and make investment decisions based on personal risk-return
preferences and potentially of the investment opportunity in increasing the value of the portfolio holding.