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3 Key Strategies for Investing Success

It’s been more than two weeks since 2014 started, so the New Year has come and gone. But that doesn’t mean that your investment portfolio cannot be re-evaluated and fine-tuned anytime for a fresh start.

Here are three valuable but often overlooked investment strategies that you can use to to hit the “refresh” button your investment portfolio anytime.

1. Diversify                        

No single investment performs well under all market conditions. Diversification is an investment strategy that spreads your assets among a variety of different securities, like cash, stocks, and bonds. That way, success isn’t tied to one type of investment. But diversification doesn’t end there.

You also need to diversify the investments within each category. With bonds, for example, your money should be spread among securities with short-term, medium-term, and long-term maturities, which will preserve your income when interest rates change.

It’s the same with shares. If a big portion of your equity allocation is concentrated in just one share and bad news causes its value to drop dramatically, your long-term financial security may be at risk.

It may be difficult to sell an investment that has performed well, but it’s too risky to become closely tied to the fortunes of one or two companies. If it’s too difficult to construct a diversified equity portfolio on your own, exchange traded funds (ETFs) that track a broad market index could help do the trick.

In our local share market, there are two ETFs – the SPDR Straits Times Index ETF (SGX: ES3) and the Nikko AM Singapore STI ETF (SGX: G3B) – that tracks the ubiquitous Straits Times Index (SGX: ^STI). These ETFs can help provide some form of instant diversification for investors, though there also drawbacks with the financial instrument.

2. Focus on what you can control

As an investor, you can’t control things like economic uncertainty, market fluctuation, interest rates, and inflation. Thankfully, you don’t have to.

Investment principles, not forecasts and predictions, are the key to portfolio riches. The most important investment strategies include the diversification of your portfolio, the quality of the investments you own, and how long you hold on to your investments. When the outlook is filled with ambiguity, focus instead on what you have the power to control.

3. Keep your emotions in check

One of the most important investment strategies you can employ as an investor is to not get distracted by your emotions. Investment decisions are often rushed by emotion, especially fear or greed. Just because a particular stock has been performing well for a few years and all the news is rainbows and unicorns, you shouldn’t rush into it.

American billionaire investor Warren Buffett once said: “Success in investing doesn’t correlate with IQ. … What you need is the temperament to control the urges that get other people into trouble in investing.”

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. This article was written by Nicole Seghetti and first published on fool.com. It has been edited for fool.sg.