Maximising what you get out

How to get the most out of an investment while still staying risk averse.

In a world where there is so many ways in which to make money, at the end of the day the question comes down to how much would you like to make and at what cost.

Over the past few years I've invested into a few funds and stock, some of which made me money and other who made me lose money. The biggest thing with those that made me money is the amount they made me, some made me 1-3% over a few months as compared to others who made me 10-20% over a few months now the question is which is better?

To put this into perspective, I'm talking about stocks/funds in which if I put $100 into the one and it would've been up to $103 in value over a few months, as compared to another which went from $100 to $120$ in value over the same amount of time.

Here is where the principle of maximising returns comes into play, how quickly can you increase the value of your money in one investment as compared to another whilst still keeping your risk low? Many of these types of investments are very risky, but there is a way of working around that risk. Luckily In our current age we live with so much technology that the majority of our investments can be automated to only produce the best results. I personally recommend and use ETFs(Exchange Traded Funds), BUT there are a few pros and cons to this.

ETFs are basically the same as buying a stock, except these stocks are made up of many other stocks. Think of it as buying a puzzle, where each puzzle piece is a stock and you own some of those stocks by owning the puzzle. There might be more pieces of one stock than another, but in the end they all together make up the whole puzzle.

Pros: You don't bear the brunt of the risk if something happens to one of the underlying stocks, what will most likely happen is that the fund will sell their stake in that stock and replace it with a better performing stock. All of this happens without you lifting a finger(this is what makes funds to great).

Cons: Unfortunately you don't actually own the individual stock but rather the collective of them. You can't back out and say you only want a certain stock within the fund, while owning that fund it is only credible as a whole and not as individual.

So maximizing your returns versus settling for what you can get safely? I've invested quite a big portion of my portfolio into the S&P500 index, through a company called 1nvest in South Africa. Mainly into the ETF5IT fund and the ETF500 fund.

The ETF5IT: consists of the top IT company stocks on the S&P500(apple, google, nvidia, etc).

The ETF500: consists of all the S&P500 stocks which includes the companies in the ETF5IT.

So at the time of writing this blog the ETF5IT gave me 40% for the year whilst the ETF500 gave me 30% for the year, both performed incredible in comparison to other funds. But The question is now, do I double down and by more of the ETF5IT or not?

The answer is no, In this case both yield very good results, and yes you probably could buy more of the ETF5IT, but take into account that the ETF5IT only covers the IT sector of the S&P500, thus if something where to happen to that sector the fund will com crashing down, and you'll lose more money. Whilst with the ETF500 even if something happens to that sector you are still carried by all the other sectors within the fund(retail, industrial, automotive etc.).

So to conclude, find a range of funds/stocks that will perform really well whilst if something happens to one of them the other will be able to support you if need be.