Investment Strategies: Which One To Choose And Why

Many people are afraid to invest because they think it is risky and complicated. Others even consider it a gamble; hence, they don’t want to invest their hard-earned money. According to Pew Research, only five out of ten Americans have some level of investment in the stock market, the majority of which is through retirement accounts.

The impact of the coronavirus pandemic on global economies and financial markets has not helped make investing palatable to ordinary folks. It has even complicated things and made investing more fearsome. This highlights the fact that any investment involves some level of risk. However, these risks can be mitigated if you stick to proven investment strategies.

The best investment strategies minimize your exposure to risk and increase your profit. Its ultimate goal is to help you grow your wealth, meet your financial goals, and achieve the life you desire.

Different investors have different investment principles from which their strategies evolve. Investment strategies are affected by several factors such as your risk appetite, duration of investment, and level of involvement. Usually, investors combine multiple tactics to come up with a unique strategy. For example, you can put money on stocks and the real estate market.

Although stocks, real estate, and bonds are among the popular investment instruments, you can always invest in any wealth-building opportunities. There are investment platforms like GainWest that enable you to invest in growing businesses. Over the past years, Bitcoin and other cryptocurrencies have been creating a buzz as a potential investment instrument.

To help you come up with an effective investment approach, we take a look at some popular investing strategies.

Buy-and-hold investing

In this simplistic approach, you only put money on investments that you believe will perform well over time. Buy-and-hold strategists don’t get rattled by short-term market volatility. They hold on their investment and look forward to the time their target is hit. This approach requires careful evaluation of the prospective investment – whether they are a small-cap stock, real estate assets, or broad index funds. It also needs extreme patience as this strategy expects long-term growth prospects.

Buy-and-hold investing can save you time as you don’t need to regularly check your portfolio. Once initial work is done, you can continuously add to your chosen investment and hold on to it until it’s time to sell. If you pick the right investment, this strategy can yield better returns than active trading.

Growth investing

Another way to grow your money is by investing in emerging companies with an above-average growth forecast. Typically, these companies offer unique and inimitable service or product that serves a particular market or solves a problem. Although growth stocks come with risks, they offer better returns over a short period as compared to more established investments – but only if the company follows its upward track. Usually, companies in the tech sector are ideal growth investing.

Value investing

Warren Buffet and other well-known investors are known to use value investing. With this strategy, you invest in undervalued stocks with excellent fundamentals and strong prospects. The aim is to wait to gain profit once these stocks achieve their actual potential in the future. This strategy requires the active monitoring of market movements to identify undervalued stocks at a given period.

Value investors actively scout for stocks that are historically successful but have crashed due to some market jitters. These companies tend to bounce back once the circumstances are resolved.

These are the three basic investment strategies. It doesn’t mean that you should stick on only one investment strategy. Most investors combine these approaches to come up with an overall strategy that works for them.

When deciding which investing approach to take, you must consider your goals and your present circumstances. Things such as your age, finances, level of knowledge, and risk appetite can determine which investment style is best for you. Developing your unique investment strategy can take time – and it’s not always on the good side. Many successful investors have grown their strategies through the trial and error method.

Lastly, investing is a lifelong journey, so expect your strategies to change over time. As you gain more experience, you’ll explore better approaches to help you achieve your goals.

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