15 Tips for Optimizing Your Investing Portfolio

Investing your money is a great way to build wealth since you can put your cash to work for you to help grow your net worth. But you'll want to be smart about how you invest to optimize the chances of success.

Following these 15 tips should help you to become a better investor and keep more of your returns, so your portfolio balance grows as large as possible.

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Everyone has a different level of comfort with risk.

If you are willing to accept a greater likelihood of loss, you can make riskier investments with a bigger potential payoff. But if you're likely to panic when your portfolio goes down, you should opt for safer investments.

Your age and investing timeline should also guide you in evaluating your risk tolerance. If you'll need the money soon and don't have time to wait out downturns or recover from losses, you'll need to be much more conservative than a young person with plenty of money to spare and many years to wait for the market to bounce.

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Investing too much money in one company, or even in one type of asset or industry, increases the risk of loss.

You should make sure that you spread your money around to all different kinds of investments, so when some disappoint you, others will likely perform better than anticipated.

To ensure your money is invested properly, you'll need to know what your goals are for your account.

For example, if you want steady income from your investments, you may want to look into buying real estate investment trusts or purchasing lots of stocks with large dividends. If you're hoping for aggressive growth, then buying shares of individual stocks with the potential for share prices to increase substantially could be your best bet.

If you understand your goals, you can develop a strategy for researching investments and finding ones that fit your objectives.

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When possible, invest in a tax-advantaged account such as a 401(k) or IRA so you can get tax breaks for contributions and your investments can grow tax free.

If you have assets in a taxable brokerage account, try to hold on to them for long enough that you're subject to the lower long-term capital gains tax rate rather than the higher short-term rates.

There are many different asset classes that you could invest in, including stocks, bonds, CDs, mutual funds, exchange-traded funds (ETFs), and cryptocurrencies.

Each has its own pros and cons, and you may want to own a broad mix of them. Or you may want to steer clear of some that you feel present an unacceptable risk.

By exploring all the different kinds of investments out there, you can decide how to divide your money among them.

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Broker fees can reduce the size of your portfolio. And there's little reason to pay high fees now that so many brokers focus on attracting customers by keeping costs down.

You should specifically make certain you don't invest with a brokerage that charges inactivity fees, that imposes minimum balance requirements you can't meet, or that charges a commission for trading stocks or ETFs.

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With some investments, such as ETFs and mutual funds, there are additional fees associated with investment expenses.

These fees can vary depending on whether the funds are actively managed, with someone selecting investments, or are passively managed, with investments selected in order to mimic the performance of a financial index.

High fees from your investments also reduce the effective returns you get, so watch expense ratios and opt for lower-cost options.

Investing helps you build wealth because of compound growth. When you earn returns and reinvest them, those returns will help you earn even more money.

The more time you have for compound growth to work its magic, the more your portfolio balance will grow on its own and the bigger the nest egg you'll end up with. So to optimize your portfolio, begin contributing to investment accounts ASAP.

ALSO READ: Want to Retire With $1 Million? Here's How Much You Should Invest Today

Investing sometimes ends up becoming a low priority when you have other pressing expenses that you need to cover today.

To make sure that you're putting enough into your accounts, set a clear financial goal, determine how much to invest to reach it each month, and automate your contributions.

With this approach, you'll optimize your portfolio by making sure you can buy enough assets to earn generous returns and build wealth.

Ideally, you'll want to buy more of your investments when their price is low and less when their price is high. Unfortunately, it can be really hard to time your purchases so that happens.

To avoid the trick of market timing, consider dollar-cost averaging or buying the same amount of an asset on a set schedule such as investing $1,000 in a particular ETF on the first of every month.

With this approach, it's inevitable that you'll be able to make some purchases at low prices. And when the cost is down, your $1,000 will naturally buy you more shares at that discounted price.

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Fractional shares provide a great opportunity for people to invest in high-quality assets even if they don't have a lot of money.

Many brokers now allow you to buy fractional shares or partial shares, such as half a share or a quarter share or even less. Because you can do this, you are no longer limited to only buying stocks you can afford a full share of.

If you want to invest in companies with high share prices because you believe in them, fractional shares make that happen. Be sure to include these in your portfolio so you have the maximum number of investment options despite the size of your pocketbook.

ALSO READ: Fractional Shares: What Are They & How Do They Work?

As your risk tolerance and investing goals change, you should alter the composition of your portfolio. This is crucial so you continue to maintain a diverse mix of different assets that expose you to the right risk level baed on your current needs.

It's a good idea to rebalance at least once per year to make any necessary changes.

Investing in assets you don't understand makes it really difficult to evaluate whether you are making a sound purchase.

To avoid undue risk, be sure to only buy investments that you can carefully research. And confirm that you know what makes them worth their value and how they will make money for you going forward.

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There is lots of financial advice available on the internet and especially on social networks. There are also plenty of "experts" out there who want to help you for a fee.

Often, the people giving this advice either don't have your best interests at heart or may not have the knowledge they claim to possess. Ultimately, it is your money on the line, so don't take investing advice unless you really know the source, understand their incentives, and trust them implicitly.

Finally, trying to make a quick buck by investing for short-term profits rarely pays off.

If you want to optimize your portfolio and have the very best chances at becoming a successful investor, you should commit to purchasing and selling assets for the long term.

5 Stocks Under $49
Presented by Motley Fool Stock Advisor
We hear it over and over from investors, "I wish I had bought Amazon or Netflix when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!" It's true, but we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Click here to learn how you can grab a copy of "5 Growth Stocks Under $49" for FREE for a limited time only.

Making smart choices to optimize your portfolio can make all the difference when it comes to the amount of money you end up with. Implementing as many of these 15 steps as possible will help set you up for success, so get started today.

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