- Difference between Goal and Strategy?
- How to pick your Investment Strategy?
- 2 Steps to Know Yourself
- Risk Return trade-Off
- Top 5 Investment Strategies
Puzzled with Where to Invest your Money? Which Investment strategies do successful people follow? Which are the best investment strategies? Let’s discuss it, So whenever we say about the strategies, people get confused about what is a goal and what is strategy.
Difference between Goal and Strategy?
In simple word, the goal is a destination where we have to go but strategies is a way to find that goal or how one can decide to reach till goals. Strategies tell how to move through all the hurdles in the most effective way to till the goal.
How to pick your Investment Strategy?
Strategy is the thing which we need in any walk of our life. People need a proper plan to execute at every stage of their life either purchasing of own house, own car, the marriage of self or children, how to study to score more in exams. Similarly, we have a strategy for our investment plans.
There is no law on investment plans it’s just a guide that how you can choose your investment plan. So what are the terms to judge whether your investment is correct or not, There are multiple parameters such as Risk Appetite, Goals, and Time-Horizon.
Depending on your need you can finalize your Strategy If its security is important then you can opt for the low-risk type of investment. As per your goal you can make the way for your investment to move closer to your goal. Also when you need returns is it in short term or a Long period after so by checking this too you set your parameter to achieve your goals.
2 Steps to Know Yourself
- Every individual’s investment strategy is different than other
- Your investment strategy will depend on your goals. And every goal has there own strategy to achieve it either buying a car or house or study plans.
But before choosing an investment strategy there is a need to do KYS (know yourself).
KYS – Know Yourself
It is similar to KYC the term KYC means to Know your Customer or Client but that is done for Businesses. But the term KYS stands for “know your self“.
- Reason: First you need to understand who are you and what is your need through this your investment Strategy will decide and with help of that you can use parameters for it
- Age: If you are younger then your risk-taking capacity will be higher and if you are in the 40-50s stage you have a good amount to invest but your risk-taking capacity will not be much.
- Time Horizon: If you can choose for a long term goal suppose to buy a car after 10 years so would you think a better exposure for equity as compared to debt, Off course yes cause equities can be a good long term investment rather than short term investment totally depend on time Horizon.
- No. of Dependent: The number of Dependent gives you more responsibility which is definitely going to effects your risk-taking ability, If you have fewer dependents on you then you can go for high risk and you can choose investment plans accordingly and Vice versa.
- Income: This is a major term which you have to judge and act accordingly is your income is fixed or unstable, If it is fixed then you have a higher risk capacity and if income is unstable you have to make a bench-mark and work accordingly
- Risk Profile: You have to check out your risk-taking capacity. Everyone has their own statics and needs to plan by considering all the above terms.
So based on all these parameters you can get to know yourself you can complete your “KYS”.
Risk Return trade-Off
Risk profiles are of 3 types
You have to choose yourself under these 3 Risk profiles
Now we move on to the next step where we can set the connection between returns and your risk appetite. So, as we know higher risk has a higher return. This shows in a typical risk-return trade-off, The lower risk the potential return will be lower.
These all are the base Understanding of Investment Strategy
Top 5 Investment Strategies
Let’s Discuss about- Actual investment Strategies. There are many Investment strategies these are the top 5 Best for common needs.
1. Value Investment Strategies
You invest in the things which are undervalued, or we can say you purchased goods or stocks that carried lower values than their actual one or market price. Which will grow during a certain period of time or over years.
Doing this as an investor the person needs to have is patience and trust in his investment this method called as Buy right site tight Strategy. The focus you need to put on the stocks which are lower than their actual rates or which are at a discounted price but definitely going to grow within a period of time.
One must have to do a strong fundamental analysis and valuations of the Stocks before doing so.
If you have an interest in this strategy then your portfolio’s major portion should cover by Value Stocks and the rest can go into Debt.
2. Growth Investment Strategies
Investing in stocks that have very high growth. Growth in terms of top-line (Revenue) and Bottom line (Profitability) But the question is how can you decide it carries high growth or not so make its comparison. Compare it with Peers (competitors) or with the Industry average.
In this Strategy, you don’t have to focus on discount prices either you have to check if the company carries a higher growth in its field.
If you have an interest in this strategy then your portfolio should be a major portion should cover by growth stocks, another part with Mutual funds, and minor for others.
Difference Between Value Investing and Growth Investing
Let’s Discuss the difference between Value Investing and Growth Investing with an example-
Suppose you need to catch a train through the station. And it’s standing at the station so you catch it get settled before the train starts hoping that it will take you to your destination early and properly as thinking about “Buy right site tight” these means Value Investment Strategies.
And When you catch the train after looking at its comfortability and Speed of moving and until & unless it proves its growth that means Growth Investment Strategies.
3. Income Investment Strategies
The income investment plan is what you invest in investment avenues which gives a steady stream of income so this steady income can include Dividend income, interest income, and many more.
For dividends, you can invest in stocks or REITs and for interest income, you can get it through bonds and Debentures. In these cases, the peoples who were Generally Retired are more interested in this type of investment as it provides with steady Income Stream.
4. Conservative Investment Strategies
The Conservative investment is for those ones who are not willing to take high risk they are like persons who think if they are investing 100rs they didn’t want that their 100 converts into 200 they are slightly looking for the safer side.
These types of Investor need to invest in large blue-chip companies for them their portfolio will be a major portion will go for fixed income securities like 70-80% and minor for Stocks but bigger companies
5. Aggressive Investment Strategies
This is totally the opposite of Conservative Investment. This investment is followed by persons who are highly looking for high returns without much thinking about risk.
These types of investors need to make investments in Small Caps, Mid Caps, Commodities, and Collectibles. Today NFT is in the fashion of Collectibles. The portfolio of such this types of persons will be 70-80% in small caps, Midcaps. 10-20% in Debenture or bonds.
We hope you got enlightened with various Investment Strategies you have to perform KYS (Know YourSelf) self-examination and then Select the appropriate investment strategies as per Plan, Risk Appetite, and Time duration.
What Is KYS – Know Yourself?
KYS is strategy used for setting up the Financial Goals where you analysis this 6 major point and decide your Investment strategy
1. Reason for Investment
3. Time Horizon:
4. No. of Dependent
6. Risk Profile
Which are the Top 5 Investment Strategies?
The Top 5 Investment Strategies are
1. Value Investment
2. Growth Investment
3. Income Investment
4. Conservative Investment
5. Aggressive Investment
What are the Types of Risk Profiles?
There are in general 3 Types of Risk Profiles
Also Read Basics of Demand and Supply