Good investment strategies are everything you should have if you want to succeed in the business world. In addition to that, a good team also is an advantage. On that note, we will explore 10 investment strategies every investor must have to succeed.
One of the most effective ways of wealth building is to secure your future financially by investing in lucrative sectors. There is no doubt that the business world is filled with many uncertainties; however, so is life.
On a brighter note, I will share with you specific, time-tested principles in this post that can help you secure your investments and boost your chances for long-term success. Let’s explore some investment strategies, shall we?
What Are Investment Strategies?
Investment strategies are plans of action used by investors to achieve long-term financial goals. In other words, they are methods investors use to share their resources in one or different businesses to achieve their specific goals. Additionally, there is no one-size-fits-all when it comes to investment strategies.
Investing tactics can differ depending on the investor’s financial objectives, risk tolerance, time horizon, and even market conditions. So, it is not just about picking and diving into any business. It is about having a defined strategy and sticking to it.
What Is Long-Term Investing?
Long-term investments are generally assets acquired through investment methodologies held for a long time, usually above three years or even decades, to generate profits over time through capital appreciation or dividends.
Instant or immediate profits are not the main drive of long-term investments. Instead, such types of investments are mainly about potential growth, capital appreciation, and income in the future.
Some key characteristics of long-term investments include time horizon, types of assets, growth potential, risk and return, lower liquidity, and tax benefits. Stocks, real estate, retirement accounts, and bonds are examples of long-term investments.
Long-term investments are perfect for people who want to achieve their financial dreams, build wealth, and plan for retirement.
What Is Short-Term Investing?
On the other hand, short-term investments are investment strategies to acquire financial assets to be held for a short time, mostly less than a year or two. These types of investments aim to quickly generate profit or preserve capital while maintaining liquidity.
Two main characteristics of these types of investments are that they involve less risk than long-term investments and offer lower potential returns.
Here are some examples of short-term investments: money market funds, certificates of deposit, treasury bills, savings accounts, short-term bond funds, and peer-to-peer lending. Some uses of short-term investments include emergency funds, temporary holding, and savings goals.
For individuals who want to keep their capital, earn modest profits while waiting for longer-term chances, meet near-term financial duties, and maintain liquidity, you should consider short-term investing.
What Is The Safest Investment With The Highest Return?
Sadly, there is nothing as such. There is always a risk of losing and a chance of gaining profit. In other words, it isn’t easy to find a safe investment that offers high profits. The bottom line is that some investments are safer than others, but no investment is 100% secure.
Here are some choices: High-yield savings accounts, treasury securities, money market accounts/funds, municipal bonds, and dividend-paying blue-chip stocks. Some of these investments are reasonably safe. It is also vital to consult with a financial advisor and assess your investment goals, risk tolerance, and time horizon before taking any step.
This article explores ten key investment strategies that can assist you in maximizing returns, managing risk, and ensuring your financial security.
1. Identify Your Specific Long-Term Investment Goals
Identifying your long-term investment goal is one of the first things any investor should put in place before making a move. Why, you ask. Without a specific goal, what’s the need for a start or pursuit in the first place? How, then, do you tell if you are on the right track?
Again, it is worth stating that before beginning the journey of investing your resources or even adopting any investing strategies, it is crucial to understand your long-term goals.
As humans, we are purpose-driven, and as such, that will give us a reason to want to make our dreams a reality. Also, we must remember that we all have different reasons for wanting to invest. So, you should never forget your mission.
Investing is about one’s preferences, and we all have our different objectives in the business world. Some want short-term profits, while others want the opposite. Not knowing why you want to launch into anything is a bad bargain. Because there are always going to be countless obstacles on your way to achieving your dreams.
Obstacles like inflation, fluctuating interest rates, human factors, and economic uncertainties are some of the many barriers that can stand in the way. So, this is a call to reevaluate and get things straight because every investor must understand why they began the journey initially. Otherwise, before you know it, you might consider quitting.
Furthermore, what are you interested in investing in? Every sector has its peculiar chances and challenges. I brought this up to tell you that every industry has unique chances. However, it is important to understand if they match what you have envisioned. Do they match your goals in the long term or the short term?
Interestingly, making the choice is not just about profits and returns alone. Some prefer timeless and firm sectors like real estate, while others prefer healthcare, automobile, or technology. Ultimately, it is mainly about making the right choice in the right sector to venture into.
2. Start Your Investment Journey Early
Making time work for you is better than allowing time to work against you. To be honest, I know how the latter feels, and it is not a good experience. Time is your most valuable asset, even in the world of business.
One of the first things you have to know is that investing early has countless benefits. One of the benefits is that you have more time than one who started late for your investment to grow. Another is that you can venture into more investments, and that means taking more risk because you are younger and have a longer time horizon to recover should you encounter any losses.
Sometime this year, my mentor was hosting a business conference in my city. Since I was free, I decided to attend. One of the things he said was that he had stopped exploring riskier assets, which can yield higher returns, because he has kids to feed, more bills to settle, and age wasn’t on his side.
He went further to say that while he was still coming up, he had once lost $9,000, and of course, he felt terrible. Honestly, he cannot afford to lose that because he is at a different phase in life.
Another advantage of starting early is that it allows your investments to grow and compound over time. Compounding is so crucial that delaying your investing by some years or deciding not to reinvest can have the potential to affect you negatively.
It would be best if you believed that starting early gives you the opportunity to learn about investing and gives you the chance to develop some excellent investment strategies as a result of experience.
3. Stay Calm Even If The Market Panics
One of the best advice ever given to me was this: remain calm even if the market panics. There are numerous reasons why you should adopt this style, too. Firstly, the market can be volatile, and that’s quite normal when it comes to financial markets and investing. Honestly, it is to be expected.
It is not as easy as it might sound, but staying calm or exercising patience is an excellent tool. Prices will fluctuate, so whenever you experience large swings in a short time, do not let them dictate your next move because, most times, the next move is powerfully driven by an unhealthy emotion. Most times, in such moments, we want to make back what we lost, and in the end, we end up losing more than we can imagine.
So, it is advised to exercise patience and perseverance when investing. As stated earlier, many investors make the mistake of reacting instantaneously without careful consideration because of inevitable downturns and market changes. Other times that might be the right step, but investors must remain calm, exercise patience, think carefully, and trust the process.
I admit that some market changes, especially the unexpected ones, can be crippling. However, most volatility concerns and price differences are usually short-term, and shortly after that comes appreciation.
Moreover, it is vital always to see the bigger picture and exercise patience even when everything seems crumbling. Do not sell the stock when the market appears to be in disarray. Patience has helped many investors, and you can make it work for you. Employing this as part of your stock market strategies would be best.
This strategy is all about not making hasty decisions. However, the financial markets can be fast-paced sometimes. You should also always have time to carefully consider investment options before deciding.
4. Understanding Your Investments
There are many investment strategies to adopt. However, one thing you should never strike out is understanding your investments. Failure to understand your own sector is a recipe for failure.
One of the reasons we advise investors to understand what they are investing in is to empower themselves to make informed choices, stay on track to achieve their financial goals and manage risk effectively. Do away with the myth that says you have to be a financial expert before investing. However, knowing and understanding the basics of what you are investing in is crucial.
As earlier stated, investing is a vital part of financial planning, which also offers the potential to grow one’s wealth over time. Moreover, none of that can occur without understanding your investment. Investments come in different forms, each with its risks, characteristics, and potential returns.
It would be best to do extensive research on the area you want to venture into. This also includes speaking with trusted investors with a good track record in those areas. At some point, you will need the experience they have gained because of time.
Another thing I must stress is understanding your risk profile. It is imperative to your success. Although, it is not as easy as many make it sound. One of the best ways to know this is by trial and error or experience.
How much are you willing to lose? If a 7% drop in your portfolio’s value leaves you awake all night, it is clear that you are a conservative investor and not an aggressive one. As much as I advocate that you understand your investment, it is also vital to understand yourself.
Additionally, it is vital to understand how risks link to long-term returns and your capability to reach your financial goals. Again, as I stated earlier, your risk profile, alongside your tolerance for roller coasters, will change as you advance in life. A person approaching retirement or in retirement is most likely to have a risk profile utterly different from those in their 20s or 30s.
5. Pick A Strategy And Stick To It
Adopting someone else’s style can be tempting due to their success. Even though that might be a good idea sometimes, other times, you should find your own that works and then stick to it. That might take you years to do through countless failed attempts. But when you find it, you will be glad you didn’t give up.
At the conference where my mentor came to my city, one of the speakers told us how he once lost $19,000 because he had followed someone else’s strategy. Forex trading isn’t for the weak! All that loss came because he followed someone else’s investment methods. He said the fellow he followed once flipped $3,000 to $98,000. Now, that’s some story – a very tempting one.
Sticking to a single philosophy that works perfectly for you is essential. However, it is highly immature to oscillate between various approaches continually. At the end of the day, you will one day wander into a dangerous territory.
I want to share the story of Warren Buffet with you. In the late 90s, he stuck to his value-oriented strategy and steered clear of the dot-com boom. Subsequently, when the tech startups crashed, he avoided significant losses.
6. Diversification Works
“Do not put all your eggs in one basket,” have you ever heard of that? One of my best investment strategies is to diversify. Diversification is simply about spreading one’s investments across different asset classes, most of the time to reduce risk.
One of the reasons behind diversification is that various asset classes like bonds, stocks, real estate, and commodities perform differently under the same economic climate. Interestingly, by following this fundamental investment method, you get to minimize the impact of a poor-performing asset on your investment portfolio.
Investment is a risky move in every sector. That means investors are bound to navigate through negative scenes. It is on this note that you are advised to have a substantial diversified portfolio. While the extent of diversification depends on certain circumstances, it is almost impossible to manage and control all the potential risks in the market without diversifying.
As witnessed in recent times, sectors like real estate investment trusts can be pretty much shaky for an extended period. The time-tested or reliable strategy that can help lessen the negative impact on your investment portfolio is diversifying.
In plain terms, diversification is vital for alleviating risk. For instance, suppose you invest all your finances in a single asset or stock class. You are prone to major risk if that specific investment performs poorly. On the other hand, by spreading your investments across multiple asset classes, you can lessen the impact of any investment that performs poorly.
Besides, diversification gives you the liberty to take advantage of the growth potential in various markets and sectors, potentially enhancing your returns. This is another reason to consider adopting this strategy.
Finally, even political events can affect a single industry. So, it is advised to diversify if you have the capacity to do so.
7. Don’t Get Emotional
As humans, we are beings of emotions. As such, it is not possible to talk about humans and neglect the aspect of emotions. In summary, emotions are a part of our makeup. In business, keeping your emotions far away from your investment choices or decisions is best. Earlier, I shared a bit on that in one of the points discussed.
Many are of the opinion that the foe of long-term investors is market volatility. Well, that’s not entirely true. As long as you are into business, no matter the type, ups and downs will always be present.
If you agree that ups and downs will forever be present, what then is the real enemy? The foe of long-term investors is their inability not to get emotional. As a result, there will be this inclination to want to get in and out of the market, especially when things don’t go as they envisioned.
I know it is not easy, but with constant practice, you can master those emotions. It is wise to remember that long-term investment strategies are grounded on adhering to the plan over time, irrespective of how you might feel about the economy, political atmosphere, or fiscal policy.
There are always cyclical periods in every market. Over time, they will go up, and the best way to take part in the growth the market has to offer is to stay invested even during the bad times because shortly after those times come the best periods.
Lest I forget, even greed during upswings can lead to poor decisions.
8. Avoid Get Rich Quick Investments
One trap all investors must avoid is to steer clear of investment strategies that guarantee quick wealth or quick access to profits. Due to a lack of patience or a rough ride from the market, many may try these kinds of investment strategies.
Of all the investing methods, never fall for “get rich quick” schemes. Whatever promises to make you a multi-millionaire overnight or guarantees some sort of huge profits is a fraud. That should be for people in the casinos and not for genuine business people.
Usually, if it seems too good to be true, it sure is the fastest way to ruin yourself and your financial mission. Don’t let greed take over you. From my experience, anything that promises high returns with minimal risk involved is always a sure road to be trapped.
Mind you, just as there are legitimate businessmen and women in the world, so are there fraudsters. I like to call them wolves in sheep’s clothing. They present you with offers, sometimes from what seems credible, but it is all false. The bottom line is that many scammers are looking to take advantage of investors.
Before investing, consulting with a financial advisor to help you review whatever they propose is excellent.
9. Regular Portfolio Review
An occasional review of your portfolio’s performance is essential to your success. This should be a routine, especially if you do not have a financial professional on your side (but I strongly advise that you get one).
Here are a few reasons why reviewing your investment portfolio is vital.
Conducting a regular review will ensure your investments remain in alignment with your own financial goals. This also means you can monitor and track your progress and see how well or poorly your investments are doing. The essence of doing that is to make proper adjustments where needed.
Furthermore, it can aid you in spotting any possible red flags that indicate you need to restrategize and do things differently. Also, it can assist you in mastering discipline and avoiding making emotional decisions that could put you at significant financial risk.
10. Invest for Growth
If the financial goals you have set for yourself are some years from now, it would be wise to think about an aggressive growth strategy strongly. This method focuses on investing in companies or assets with the possibility or likelihood of higher returns or those with high growth possibility.
As a growth investor, look for growth stocks or companies expected to experience a positive shift in their earnings. Some of those sectors in recent times are healthcare, consumer goods, and technology.
Some stock strategies include choosing a trading firm, determining how much to invest, balancing stock investment with your finances, and using a robo-advisor. As earlier stated, there are risks, but they can offer positive rewards in the long haul.
Final Thoughts…
Always remember your long-term goals and do your best to protect your investments by making informed decisions. If you are looking for tried and trusted investment strategies, stick to the abovementioned strategies.
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