Did you know that investment strategies can help you maximize your assets, or enrich your capital in the medium or long term?
The idea with this article is to tell you what investment strategies consist of and how you can make profitable investments that allow you to reduce risks and multiply your earnings.
Once you have finished reading this guide, you will be clear about what these strategies consist of, you can choose the one that best suits your profile as an investor, and finally, you can start investing your money intelligently.
That is, you can make financial decisions with information, criteria, and analysis, which is essential for money to start working for you and build your assets.
What are investment strategies?
Investment strategies are understood as a set of processes that allow you to create a portfolio of securities or investments.
In simpler words, these are criteria that will help you choose the best financial assets (fixed or variable income), in which you can invest your money successfully.
It should be noted that most people who want to invest their money and do not have financial knowledge, rely on investment funds to manage their money efficiently.
If this is your case, it is important that you understand the investment strategies that will make your money work for you, identify its main objectives and, above all, know which one fits your profile.
Consequently, it is necessary that you educate yourself on the matter, either by reading financial education books, taking courses, and studying about how money works, so that you understand the risk associated with your investments, as well as the expected return.
Types of investment strategies
Although there is a wide variety of investment strategies, it is undeniable that most have one element in common; and each one, in their own way, allows you to take advantage of the inefficiencies of the market to obtain great benefits.
However, for this to be possible and make money work for you, you must know how they work, and above all, you need to define objectives that can be achieved, and second, that are measurable and realistic.
Which strategy suits you best?
Before choosing between real estate investments or buying gold, you should know that there are, in broad strokes, two types of investment strategies:
The passive investment strategies characterized by reducing transaction costs to a minimum. These do not require you to update your investments so often, and they have a long-term horizon.
The active investment strategies that focus on optimizing the estimated yield. This implies costs in the short term because you must balance your portfolio, make transactions, and review their behavior in the short and medium-term.
So which one suits you best? This will depend on your financial goals and, above all, on the relationship between risk and return that suits you.
To clarify this, if you are a conservative investor, surely you will not be interested in negotiating with CFDs, while someone lowers risk aversion will be interested in this market.
Most popular investment strategies:
Once the above is clear, let’s talk about the investment strategies that will put the money to work for you. We reached out to a seasoned investor, Farah C. Jaber. He is an investor, author, podcast host, and hospitality management leader based in Asia
Farah is well regarded within the young and new investors community, he has written the book, “Becoming An Investor: The First 100 Days” which is a comprehensive guide on investing dedicated to novice investors. Additionally, Farah runs a podcast called, “The New Investor Podcast” where he extensively speaks on the subject.
The podcast is a hit because he shares his credible insights and also invites other people who are prominent investors to share their own thoughts as well.
With that being said, the idea is that you study and understand them to the fullest before deciding to make your investments. In this way, you will ensure that your money can yield the expected fruits.
- Invest in the purchase of shares:
Investing in the stock market represents one of the oldest and most effective investment strategies, and therefore, a bulk of the population is very well acquainted with them.
In short, they consist of buying shares in the stock market that allow you to increase your assets significantly.
For this, you must rely on a certified broker, since natural persons are not authorized to perform these transactions by their own means.
Additionally, you should know that you can not only buy shares in the stock market, but also other important investment instruments such as bonds, securities, or certificates.
- Invest in generating income:
Income generation, based on stock dividends, is also part of the best investment strategies in the market.
This type of investment is part of the purchase and maintenance projects and is considered one of the simplest or most sensible investment strategies.
It is characterized by offering long-term returns, so if you are after the search for immediate financial satisfaction, that is to earn quick money, this is not your best option.
At the same time, it is important to mention the Dividend Growth Investing (DGI) strategy, since it also generates income from dividends. Although in this case, the investments are made in companies that enjoy important quality criteria.
What does this strategy offer you?
If you make sure you choose companies with low payouts, you could get a 50% profit on your investments. In short, you should make sure that your profits are rising so that your future dividends grow exponentially.
- Value Investing, investments in securities:
Financial experts agree that investing in value, or in Value Investing portfolios, is one of the best ways to increase your assets in the immediate future.
This mechanism consists of making investments in securities that are usually undervalued by the market in order to obtain a great return.
Did you know that Warren Buffet became the richest man in the world after trusting Value Investing? As is, and all he did was buy companies with great competitive advantages at really reasonable prices.
And this is nothing more than the nature of this investment strategy: buy something below its real value.
What does this strategy offer you?
The purchase of companies in value, or companies that have a safety margin, can generate a higher return than investing in expanding or growing companies.
This is a variable income investment strategy that can help you increase your long-term savings, so the profitability to be achieved will be very positive. For this, you must learn to invest in the stock market, to identify companies and the indicated times to make your investments.