Investment Strategy

Santri Alat - Investment Strategy - Because investing is not a sure thing in most cases, it is much like a game – you don’t know the outcome until the game has been played and a winner has been declared. Anytime you play almost any type of game, you have a strategy. Investing isn’t any different – you need an investment strategy.

An investment strategy is basically a plan for investing your money in various types of investments that will help you meet your financial goals in a specific amount of time. Each type of investment contains individual investments that you must choose from. A clothing store sells clothes – but those clothes consist of shirts, pants, dresses, skirts, undergarments, etc. The stock market is a type of investment, but it contains different types of stocks, which all contain different companies that you can invest in. 

If you haven’t done your research, it can quickly become very confusing – simply because there are so many different types of investments and individual investments to choose from. This is where your strategy, combined with your risk tolerance and investment style all come into play. 

If you are new to investments, work closely with a financial planner before making any investments. They will help you develop an investment strategy that will not only fall within the bounds of your risk tolerance and your investment style, but will also help you achieve your financial goals. 

Never invest money without having a goal and a strategy for reaching that goal! This is essential. Nobody hands their money over to anyone without knowing what that money is being used for and when they will get it back! If you don’t have a goal, a plan, or a strategy, that is essentially what you are doing! Always start with a goal and a strategy for reaching that goal!

Understanding Investment Strategies

Investment strategies are styles of investing that help individuals meet their short- and long-term goals. Strategies depend on a variety of factors, including:

• Age
• Goals
• Lifestyles
• Financial situations
• Available capital
• Personal situations (family, living situation)
• Expected returns

This, of course, isn't an exhaustive list, and may include other details about the individual. These factors help an investor determine the kind of investments they choose to purchase, including stocks, bonds, money market funds, real estate, asset allocation, and how much risk they can tolerate.

Investment strategies vary greatly. There isn't a one-size-fits-all approach to investing, which means there isn't one particular plan that works for everyone. This also means that people need to reevaluate and realign their strategies as they get older in order to adapt their portfolios to their situation. Investors can choose from value investing to growth investing and conservative to more risky approaches.

As mentioned above, people can choose to make their investment decisions on their own or by using a financial professional. More experienced investors are able to make decisions and investment choices on their own. Keep in mind that there is no right way to manage a portfolio, but investors should behave rationally by doing their own research using facts and data to back up decisions by attempting to reduce risk and maintain sufficient liquidity.

Types of Investment Strategies

Investment strategies range from conservative plans to highly aggressive ones. Conservative investment plans employ safe investments that come with low risks and provide stable returns. Highly aggressive ones are those that involve risky investments, such as stocks, options, and junk bonds, with the goal of generating maximum returns.

People who have a greater investment horizon tend to employ aggressive plans because they have a longer timeline while those who want to preserve capital are more likely to take a conservative approach.

Many investors buy low-cost, diversified index funds, use dollar-cost averaging, and reinvest dividends. Dollar-cost averaging is an investment strategy where a fixed dollar amount of stocks or a particular investment are acquired on a regular schedule regardless of the cost or share price. Some experienced investors, though, select individual stocks and build a portfolio based on individual firm analysis with predictions on share price movements.