How do you invest your money for the best returns? Here’s a successful strategy that takes a conservative approach to long-term investment decisions.

We’ve been asked many times, “How do you invest your money for maximum growth?”

In our view, your goal as an investor, particularly if you follow a conservative investing strategy like the one we recommend, is to make an attractive return on your investments over a period of years or decades. Failure means making bad investments that leave you with meagre profits or losses.

How do you invest your money for maximum gains? The most successful investors we know take a conservative approach.

A conservative portfolio is a group of stocks held by an investor with the goal of achieving steady returns, including dividends, while maintaining at lower level of risk.

At TSI Network we recommend creating a diversified conservative portfolio of mainly high-quality, mostly dividend paying stocks spread out across most if not all of the five main economic sectors.

Over time you’ll still experience a wide variation in results among your holdings, but you’ll find that at the worst of times, you’ll minimize losses by holding a portfolio answering that description. When times are good, this kind of portfolio will pay off nicely. By diversifying across the sectors, you also increase your chances of stumbling upon a market superstar—a stock that does two to three or more times better than the market average.

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How do you invest your money to ensure the highest returns? There are good reasons to look for well-established companies

We think investors will profit most—and with the least risk—by buying shares of blue chip, dividend-paying stocks. The best blue chips offer both capital gains growth potential and regular dividend income.

We define a blue chip company as a well-established company with attractive business prospects. Well-established firms have the asset size and the financial clout—including solid balance sheets and strong cash flow—to weather market downturns or changing industry conditions.

The best blue chip stocks have strong positions in healthy industries. They also have strong management that will make the right moves to remain competitive in a changing marketplace. Because of this, blue chip companies can give investors an additional measure of safety in volatile markets.

We feel most investors should hold the bulk of their investment portfolios in securities from blue chip companies. All these stocks should offer good “value”—that is, they should trade at reasonable multiples of earnings, cash flow, book value and so on. Ideally, they should also have above average-growth prospects, compared to alternative investments.

How do you invest your money to build a diversified portfolio?

If you diversify across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; Consumer; Finance; and Utilities), and stick mainly to high-quality blue chip stocks—then you can be almost certain of long-term gains in excess of what you’d get with any other investment approach.

How do you invest your money in penny stocks (or should you do that at all)?

In penny stocks or games of chance, the odds are against you. So, time also works against you. The longer or more often you play, the likelier you are to lose.

Penny stocks can attract investors with their low prices and promises of high returns when they pay off. Yet the odds against success are very high with these speculative stocks. And they can provide fertile ground for stock promotions and investing scams, as well. Penny stocks can be more easily manipulated than most stocks because of thin trading and price volatility. In general we avoid penny stocks that promote themselves too aggressively (or do so misleadingly).

Bonus Tip: When economic freedom plunges, prosperity falls too

A severe drop in economic freedom can be disastrous in a variety of ways, more than just economic.

In many countries, prosperity and well-being flow primarily from economic freedom. When a country also has resource wealth, so much the better. But resources alone rarely bring widespread prosperity. More often, they simply enrich members of the government and the upper classes.

The loss of political freedom and economic freedom can feed on each other. A deteriorating economy can spur adverse political changes and assaults on economic freedom, which hurts the economy all the more.

What investing guidelines do you utilize when economic turmoil is present and you’re trying to protect your portfolio?

How do you invest your money when the economy is unsettled? Do you alter your strategy or do hold steady?