Invest intelligently to maximize returns

Investors of financial assets are looking to get the highest returns possible from their portfolio. Just as important as finding investments with good returns is avoiding bad investments that can destroy wealth. The key for success in investing is using common sense. This means investing in high quality financial assets that generate steady returns while shunning questionable assets that promises spectacular returns. If it is too good to be true, it is likely to good to be true.

For stocks and bonds, the credit quality of the issuer determines whether the investment is a good one or not. A company with solid credit ratings reflects strong business operations, healthy profits and a stable financial outlook. For the bond investor, this means that interest payments and repayment of principal at maturity are likely to be made. For the equity investor, the share price is likely to appreciate over time as long as the company continues to grow their revenue and profits.

The investments to avoid have various warning signs. It can be a debt instrument such as a bond or short-term note promising interest payments that are significantly higher than what the debt market offers. This suggests that the issuer is of weak financial standing. Whether it is a phone call or e-mail, solicitations touting extraordinary returns on unknown stocks should be a warning. These are stocks where the companies likely do not have any real business activities nor are up to date on their financial filings.