15 Ways to Beat the Stock Market in 2021

Last year, Goldman Sachs reported that the S&P 500 had delivered annual returns of 14% over the previous decade. The bank further projected that these returns would shrink considerably over the next 10 years to an annual rate of approximately 6%.

Building a market-beating portfolio takes time and patience, trial and error, and a well-developed investment strategy. Here are 15 ways to start boosting your portfolio’s performance and pursue your goal of beating the stock market with a robust and well-balanced basket of investments.

5 Winning Stocks Under $49
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!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

By definition, growth stocks are companies that produce balance sheet growth exceeding that of the broader market or of other stocks in their specific sector. Only a handful of stocks can consistently deliver this type of record-beating performance and continue generating substantial returns for investors year after year.

As an example, let’s consider two of 2020’s most popular growth stocks -- tech giant Zoom Video Communications (NASDAQ: ZM) and digital healthcare provider Teladoc Health (NYSE: TDOC). Not only did each company see its share price surge by triple digits last year, but Zoom’s revenue also tripled while Teladoc reported a 98% top-line increase.

The most effective stock-buying strategy is a diversified one, and investing in growth stocks is one excellent way to maximize and maintain above-average portfolio gains over the long haul.

ALSO READ: Growth Investing: A Step-by-Step Guide for Getting Started

It’s fairly risky to focus your portfolio on a singular type of stock or sector. The market is prone to inconsistencies, corrections, and occasionally, crashes. In times of volatility, an underdiversified portfolio can expose gaping vulnerabilities when met with market headwinds.

In buying a plethora of stocks from numerous sectors that exhibit varying characteristics, risk factors, and growth qualities, you can both expand your portfolio returns at a faster rate and guard your financial assets from excessive risk.

Consistency is key in building wealth and realizing tremendous returns through the stock market. When you buy a stock with the intention of holding it for no less than three to five years, this helps to ensure you make more savvy investment choices and don’t put your hard-earned money toward a company in the heat of the moment.

Most investors’ palms start to sweat at the thought of another market downturn. While widespread investor panic can lead some to make unwise choices after a market crash, a savvy investor knows that these unique moments in time can also offer a window of opportunity.

If the 2020 stock market crash taught us anything, one lesson is that certain sectors are far more resilient than others in times of turmoil. Another is that a fundamentally great company can still see its shares plummet when the market is down. When the market is in a tailspin and you find a stock that you believe is a quality long-term buy, try not to give into short-term investor panic.

Stock prices do rebound, and great companies don’t stay down for long. Assuming your debts are paid and savings are in order, look at market downturns as an opportunity to expand your portfolio at bargain prices.

ALSO READ: 3 Perfect Stocks to Buy If the Stock Market Crashes

Another way to increase your chances of beating the market this year and in the years to come is to add high-yield dividend stocks to your buy list. Stocks that pay a robust dividend can both significantly boost your available cash and offer a second source of income to reinvest back into growing your portfolio.

5 Winning Stocks Under $49
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!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

One of the most prominent obstacles to portfolio growth is the failure to have a defined investing strategy. Determining how you want to structure your portfolio, the level of risk you’re comfortable with, the types of sectors you want to focus on, and other elements of your own personal investment approach is key to building a profitable, market-beating portfolio.

Although market trends come and go and it’s wise to evaluate the long-term viability of short-term market shifts before buying in, that doesn’t mean you shouldn't jump on a good buy when you see it. Red-hot stocks with a history of growth and enough upside potential for investors to explore can make valuable additions to a record-beating investor portfolio when paired with other more conservative investments.

ALSO READ: 2 Hot Growth Stocks to Buy Right Now

One of the easiest ways to drag your portfolio down is to give into market-induced panic during volatile times and rush to join the mass sell-off. It’s one thing if your long-term viewpoint about a particular stock has fundamentally changed.

But if you find yourself contemplating an emotion-based investing decision when the market is experiencing a correction or crash, it’s often better to sit back and do nothing while the moment plays out.

Make your hard-earned money work to your advantage to maximize the long-term returns on every investment you make. One of the benefits of a diversified investment strategy is the broad array of catalysts you can inject into your portfolio. Every stock you buy should have a purpose in your portfolio that incorporates into your long-term buying strategy, whether that be dividends, superior growth, or long-term value potential.

With the state of the market right now, it’s more important than ever that investors be picky when choosing stocks for their portfolio. In reality, this type of shrewd selectiveness is the best way to approach investing, because it helps to better ensure you won’t make rash investing decisions or buy stocks that don’t really align with your personal investment philosophy.

5 Winning Stocks Under $49
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!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

You don’t necessarily need to have tons of cash on hand to start to build a profitable, market-beating portfolio. That being said, growing your cash position is a worthwhile goal for every investor. Besides the obvious benefit of ensuring you have a savings reserve to cover expenses should the need arise, having a solid cash position will also enable you to expand your portfolio faster and considerably broaden your investment options.

ALSO READ: Want to Boost Your Savings? 4 Expert Tips to Get Started

Market trends can be both an investor’s friend and foe. When it comes to building a high-performing portfolio, regard any such trends with caution and consider whether buying into these market fluctuations will serve or detract from your long-term investment strategy.

Exchange-traded funds (ETFs) are another great way to fuel above-average returns while ensuring portfolio diversification. When you buy an ETF, you own a portion of all the companies in that fund rather than shares of a single company. ETFs come in all varieties. Some are sector-based, while others align with the performance of a particular market index.

ETFs are an attractive option for the more risk-averse investor who wants to keep a varied portfolio without putting too much money toward a single stock. Not all ETFs are millionaire-makers, but these funds can be a fantastic way to add to a diversified basket of stocks while optimizing your portfolio’s performance.

As the structure of your basket of stocks changes with the years, you might find that you need to make some adjustments and rebalance your portfolio so that it represents your favored ratio of risk to more conservative investments.

Assessing the makeup of your basket from time to time helps you to confirm that the way in which your money is currently invested is continuing to work for you and fits with your risk tolerance. Consistently reviewing your portfolio every now and then can also help you to spot weaker investments that might be inhibiting optimal growth.

ALSO READ: 5 Simple Steps to Beating the Market in 2021 (And Beyond)

The stock market is full of surprises, and it’s easy to question your investing strategy when short-term headwinds rock your portfolio. But in the end, a long-term buy-and-hold investing thesis always wins over any near-term market tides, and defining your investing approach according to fluctuating market movements can be an incredibly risky maneuver.

5 Winning Stocks Under $49
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!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

Beating the stock market with mouthwatering portfolio returns is the dream of many investors. Turning this dream into a reality doesn’t have to be complicated.

Building a rock star stock portfolio doesn’t happen overnight. By making strategic investment choices with a long-term mindset, you can not only outpace the average investor in terms of portfolio growth but also fuel sustainable, ongoing returns to gear you toward a more financially sound future.

Rachel Warren has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Teladoc Health and Zoom Video Communications. The Motley Fool has a disclosure policy.