If you’re worried about your investment returns, you’re not alone. Many people are now seriously looking at the possibility that they might not have enough money to fund their retirements. The only other option is to continue working until 70 or 80 – or so it seems.
But that might not actually be the case. The trick with any investment is to find ways to ensure the principal grows at a high compound rate over the years. Practically any sum of money can become a fortune over a twenty or thirty-year span if you earn returns of 15 percent or more.
But what can you do to increase returns? Don’t the world’s biggest companies hire the smartest graduates to ensure that nobody ever earns above-market returns other than them?
Well, not so fast. It turns out that there are still some ways to beat the market, but it requires taking a contrarian stance on several issues. Ultimately, it means going against investing orthodoxy and doing something entirely different.
What you can expect in this article:
Choose Equities Over Bonds
The first thing you can do to improve your long-term returns is to choose equities over bonds. Instead of investing in low-risk assets, like government securities, you focus on gaining ownership in companies instead.
Bonds return perhaps 5 to 6 percent nominally per year in a healthy economic climate. Equities are closer to the 7 to 9 percent range. While a couple of percentage points might not sound like a lot, the compounding effect is enormous. Bonds take nearly twice as long to double in value, on average.
Pick Cryptocurrencies
Another place you can look for outsized returns is crypto assets. These have been on a tear over the last ten years, and will likely see gains in the future. Many smart investors are now looking at ways to get involved in mining digital assets, meaning they aren’t necessarily exposing themselves directly.
Choose Growth Over Value
You can also increase investment returns by choosing growth over value. Again, it might feel alien to many people who want to play the long game, but growth massively outperforms value, until there is a crash.
However, over recent decades, many economists have begun to wonder whether the value premium still exists. Choosing low-priced stocks should ultimately outperform those already priced highly, but the effect has been harder, or impossible, to discern in the data, perhaps because of the recent dominance of tech giants of the S&P 500.
Choose Small Companies
Another way to increase your returns is to choose small companies instead of larger ones. While the big blue chips have stability on their side, many are already at the maximum size the economy can support. Small companies, on the other hand, have the potential to grow significantly and increase output. As such, any smaller firms that are successful are likely to win big in the long-run, giving investors the types of returns they dream of.
So, there you have it: some of the techniques you can use to increase your investments returns. Remember, please seek professional advice before investing.
