Learning how to make smart investments for good returns


If you are in a position to start your own investment portfolio, you are perhaps in need of a little advice right about now; the world of investments can be a daunting, confusing, and downright alien one, filled with jargon, difficult decisions, and risk. It’s hardly surprising if you’re faltering somewhat. Do you know the difference between small and large cap stocks, or what their advantages and disadvantages are? What companies should you be looking to invest in? Is there such a thing as a safe investment?


Small and large cap stocks: Know the difference

It’s time for a little jargon. One of the most common sorts of investment is the small cap stock; that is the shares that belong to a company with a relatively small market capitalization, turning over a profit of less that $300million per annum. To some, small cap stocks are seen as a good investment opportunity, as they tend to have far lower valuations and, therefore, the potential to grow much more quickly than large cap stocks; it is, after all, easier to double the sales of a $10million company that it would be a $50million company. Smaller companies also tend to rely on less staff with higher levels of motivation to succeed and see a return upon their efforts, and there is always the chance of small cap stock companies finding hidden value beneath market inefficiencies. Don’t be swayed just yet, though; small cap stocks are often seen as relatively high risk and sometimes even fraudulent. Additionally, smaller companies will have less financial resources and limited access to capital. With no proven business models to work from, their stock will often lack the quality of large cap stocks.

Thinking bigger? Large cap stocks; that is those belonging to companies that regularly have a turnover in excess of $1billion are usually seen as the safe investment opportunity. While the shares may cost more, there is usually the potential for a far bigger return in the long run, and secure, established companies, are far more likely to be able to look after your investment. However – and it is a big, ‘however’ – the old adage, “The bigger they come, the harder they fall” can often be true in the investment world and there is always a risk that any market crashes that do occur would be utterly devastating to anyone who has invested in shares. So where should you invest? Telecommunications companies, such as those offering broadband Internet and cellular phone coverage can be particularly lucrative, especially as the market is constantly increasing. After all, almost everyone is using the Internet and is in possession of a mobile phone these days.

If you’re not confused enough, it is also a good idea to consider nano and micro cap stocks; that is, the ‘penny stocks’ of companies that turn over less that $50million, and the stocks of companies that earn more that $50million, but less than companies considered to offer small cap stocks; phew! Both of these are considered relatively high-risk investment opportunities, with a big chance of failure, although the return, if successful, can be significantly higher. It is essential to consider how stable each investment opportunity might be, and analyze the sorts of return that may be available; now is the time to seek professional opinion.


Learn from the success of others

Of course one of the best pieces of advice that we can give you is to seek advice from a professional investment firm, or individual, before making any major decisions; their guidance and experience will be absolutely vital in assisting you as you make that big decision, and they can also help you to manage and monitor your portfolio once it’s been established. After all, your need for financial advice doesn’t begin and end with the first steps into creating a portfolio, but will continue long after you make your first million. Financial advisors and investment experts are there to break down the jargon, help you to decode the difficult decisions, and explain what markets are looking good at the moment, as well as advising you on how to maintain your investment portfolio, and encouraging you when things are looking down. Can you really afford to ignore advice like that?

As well as following sound advice from a professional investment firm, it can also be useful to look towards the success of others, as well as listening to their advice. Pete Briger, who is the co-chair and president of the Fortress Investment Group, is a great inspiration to many beginning their investment journey and, as a member of the CNBC advisory board, his guidance can be trusted wholeheartedly. Good advice, such as building an investment portfolio that incorporates and balances both small and large cap stocks, is very likely to come from professional investment sources, such as Peter Briger; his globally recognized investment firm is the sort of company you may wish to seek out before creating a portfolio of your very own.

While there are some fantastic returns to be made on certain investments, there are also huge losses to be made if you don’t do your research, or invest wisely. Take the time to listen to professional advice, research the markets available to you, and think carefully about how much you’re willing to risk; only then are you ready to create an investment portfolio.


Image from Yahoo! Finance

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