- Are your investments going to be long term or short term?
- Are you looking for a return in the form of income and long term capital growth or a short term return in the form of a large capital growth?
- What is your tolerance to risk? Are you prepared to risk some of your investment capital for the opportunity to make higher returns?
If you are looking for income and long term capital growth then you should look at stocks that have a proven long term business model and pay good dividends. These stocks are referred to as Value Stocks and would be considered to have a lower risk profile. Their share prices gain over the long term and pay dividends every 6 months providing you with an income. Many stocks within the Infrastructure sector would be considered Value Stocks.
If you are looking for short term capital growth then you should consider stocks that are just starting their growth phase. These are usually new companies that are just starting production or expansion. These stocks are referred to as Growth Stocks and would be considered to have a higher risk. Many stocks within the Energy, Material and Health sectors would be considered Growth Stocks.
Don't put all your eggs in the one basket - investing evenly across Value and Growth Stocks can create a diversified investment portfolio with a medium risk profile. An educated investor can achieve both short and long term capital growth and create an ongoing income by receiving dividend payments.
The difference between a good and bad investment portfolio is always about education and knowledge. The educated investor will always look to buy stocks at discount prices and introduce simple hedging strategies to maintain the profitability of their investment portfolio during volatile times.
To find out whether investing in shares is right for you, speak to one of the financial planners at Intellichoice today on 1300 55 10 45 or visit www.intellichoice.com.au.
