Here are some wealth building strategies that will help boost your long-term portfolio gains

Long-term wealth building strategies aren’t built by aiming for outsized returns. They are built over time, and most importantly, by learning how not to repeat the market mistakes of the past.

Let’s take a look at some ways you can build wealth—and safeguard yourself against poor investment decisions.

Wealth building strategies include involve selling if you doubt the integrity of insiders

It’s always a good safe investing strategy to sell your shares in a company if you have any doubts about the integrity of the people in charge. In other words, if you think a company is run by crooks, you should sell right away, no matter how attractive it seems as an investment. There are no limits to the ways in which unscrupulous operators can and will cheat you.

To profit from this safe investing rule—that is, to use it to enhance your long-term returns, not just avoid losses—you need to apply it in a moderate fashion. You need to distinguish between lack of integrity on the one hand, and naiveté or poor judgment on the other.

Many public companies eventually run afoul of tax rules or regulatory decisions, for instance. If you take that as a sign of low integrity, you can wind up selling sound investments at market lows.

Be skeptical of companies that mainly grow through acquisitions

Making acquisitions can speed up a company’s growth, but it also adds risk that can undermine a conservative, safe investing approach. Great acquisitions are rare finds. Many acquisitions come with hidden problems or risks, or they turn out to have been over-priced.

Despite the risks, some acquisitions turn out hugely profitable. So, you’re safe investing strategy shouldn’t automatically discount companies that have grown through acquisitions. Just keep the risks in mind, and avoid companies that seem unaware of them.

Wealth building strategies: Look beyond a company’s share price

It’s a mistake to base your decision to buy or sell a stock on past stock-price performance alone. Rising and falling trends come in many shapes and sizes, depending on what’s going on in a company, its industry and the world.

A stock never gets so high that it can’t keep rising, or so low that it can’t keep falling. That’s why you have to look beyond price changes and focus on investment quality when deciding whether to buy or sell.

Resist the temptation to copy prominent investors

Sometimes you’ll hear that a stock is a good buy because some prominent investor (a company, family or individual) has a stake in it.

However, it’s important to remember that prominent investors don’t expect to profit in every investment they make. For example, sometimes they invest for strategic or political reasons, rather than profit.

To profit by copying the decisions of prominent investors, you have to copy what they do with the bulk of their money, not with token amounts of it. That’s hard to do, since prominent investors often keep their best investments hidden until they want to sell.

Compound interest—earning interest on interest—can have an enormous ballooning effect on the value of an investment over the long-term

Compound interest can be considered the mother of all long-term investment strategies. This tip is especially important for young investors to learn. This stock trading tip’s benefits apply to both stock and fixed-return, interest-paying investments, like bonds. When you earn a return on past returns, including dividends, the value of your investment can multiply. Instead of rising at a steady rate, the number of dollars in your portfolio will grow at an accelerating rate.

To profit from this tip, you need to pay attention to steady drains on your capital, even seemingly small ones—like high brokerage commissions, say. If you’re losing (or missing out on a profit of) even 1% a year, it can have an enormous draining effect on your investments over a decade or two.

Wealth building strategies: Don’t overindulge in aggressive investments

Aggressive stocks can give you bigger gains than more conservative stocks. But they also expose you to a greater risk of loss. That’s why we recommend limiting your aggressive holdings to no more than, say, 30% of your overall portfolio.

Ultimately, the percentage of your portfolio that should be held in either conservative or aggressive investments depends on your personal circumstances and risk tolerance—and your own growth investing strategy. An investor with a longer time horizon or without the need for current income from a portfolio can invest more money in aggressive stocks.

Use dollar cost averaging as one of your wealth building strategies

Dollar cost averaging is when you buy stocks gradually during the course of your working years. By using this strategy, market declines will have little effect on your long-term profits.

For instance, a dollar-cost averaging strategy involves investing equal amounts of money over a specific period ($200 a month, say).

It’s a little like systematic saving, except that you put your money into stocks (or ETFs) instead of a bank account.

If you invest a fixed sum at regular intervals throughout your working years, perhaps increasing that sum from time to time as your income rises, you can largely forget about market trends. That’s because you’ll automatically buy more shares when prices are low and fewer when they are high, and you will benefit from the long-term rising trend in the market.

All in all, if you implement dollar cost averaging, you’ll lower your risk considerably.

What other wealth building strategies have you used in your investing career? Share your experience with us in the comments.