Investing doesn’t have to be complicated.
When you’re a beginner in the investment space, it can be hard to knock it off your to-do list because there are many other issues competing for your funds.
So to get started, it is advisable to pick a strategy based on the amount you plan to invest, the timelines for your investment goals, and the amount of risk you are comfortable with.
This is where an investment strategy comes into play.
An investment strategy refers to a set of principles designed to assist individual investors in achieving their financial and investment goals. It guides the investor’s decisions based on goals, risk tolerance, and future needs for capital.
Investment strategies can vary from conservative (where they follow a low-risk strategy where the focus is on wealth protection) to highly aggressive (seeking rapid growth by focusing on capital appreciation) and there are several types.
To newbie investors, investment strategies can seem overwhelming at first. But, if utilized properly, they can be instrumental to these investors to formulate their own portfolios or do so through a financial professional. Another advantage to them is their dynamism; they can be reviewed periodically as situations change.
The right investment strategy can be one of the best pathways to financial freedom. Whether it serves as a supplement to your regular income, additional savings for retirement, or a way to pay off debt — the best investment strategies can impact your financial health for the better.
We hope you consider this as a road map to investing:
- Value investing.
What it is: investing in undervalued companies with solid fundamentals.
The goal: to buy the stock at a lower price and hold on to it for the long term until the market realizes its true value.
- Growth investing
What it is: investing in companies expected to experience high growth in the future such as the belles of the ecosystem—FinTechs.
The goal: to buy the stock at a lower price and hold on to it as the company grows and its stock price rises.
- Dividend investing
What it is: investing in companies which pay out dividends to their shareholders consistently.
The goal: to receive a steady stream of passive income from the dividends.
- Index investing
What it is: popular among retail investors and involves investing in a basket of stocks that mimic a stock market index such as the S&P 500.
The goal: to match the performance of the overall market.
- Momentum investing
What it is: investing in companies which have had recent strong performances.
The goal: to ride the momentum of the stock’s performance and sell off when the momentum slows down. Unarguably, this is a lot riskier than the other strategies.
- Contrarian investing
What it is: investing in companies that are out of market favour but still have strong fundamentals.
The goal: to buy at low prices and sell at high ones when the market’s perception of the company changes.
- Real asset investing
What it is: investing in physical assets such as real estate, commodities, and precious metals.
The goal: to benefit from the appreciation of the underlying assets and the cash flow generated by them.
This article first appeared on Angel Investing School in several tweets.
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