Investing across the world has become a phenomenon that no one would have ever expected. Long gone are the days that you have to be working on wall-street or with a high firm broker in order to be successful in the investment world. However, if you truly want to be taken seriously as an investor and want to ensure that you are giving yourself as much of a chance as possible to come out the other end with profits, you have to have a plan of action in place. This plan should ensure that you are focusing on a strategy that you will follow throughout your journey. There are a number of strategies that you can follow in order to improve your chances of success. Read on to find out which ones you should rely on.
Invest in ETFs
Exchange Traded Funds (ETFs) are becoming an extremely popular choice that investors are looking at incorporating into their diversified portfolios. The reason for the spike in popularity is that they allow investors the opportunity to access a global financial market at a smaller cost compared to investment funds. ETFs are most passive investments: This means that they are looking at your underlying investment and tracking how well this is performing. This is a great investment strategy as this allows your portfolio to be micromanaged, whereas managed funds tend to try and outperform the rest of the market, meaning that there are higher cost implications attached to that. If you’re new to the investment world, you should consider investing with ETFs.
Buy and hold
For most beginners, the buy and hold strategy is what you are taught from the outset. It is a timeless classic that has proven to be of great success to a number of investors. This strategy is true to the name. You buy the investment and then hold it for a very long period of time. If you can, you should look to never sell, however, at a minimum, you should own the investment for at least 5 years. This strategy is great as it allows you to focus on your long-term goals and not have to worry about short-term trading, which has proven to be a killer for a lot of investors. The overall success of this strategy is really down to how well the underlying investments are performing over time, and this can lead to thousands of dollars for return on investment.
Dollar-cost averaging
The dollar-cost averaging is when you as an investor add money into your portfolio regularly. An example of this is that before starting to invest you have stated that you are going to invest $500 each month, no matter what state of affairs the investment is at. If you regularly achieve this, then you are spreading out your buy points. This can be an extremely advantageous strategy as you’re able to avoid the risk of timing the market, which simply means you don’t have to put all of your money into this investment at one time. By averaging purchases, you will be able to capture the stock at the lowest. On other occasions, you will of course buy at a larger price, but over time the smaller price will mean that you have saved. This is also a great strategy for establishing investor discipline and can help you build up a larger portfolio in the best manner possible.
Buy the index
Buying the index fund is a strategy that involves sourcing a lucrative stock index and then purchasing the fund based on it. There are a number of these available to the investor market and they will be sure to help you expand your well-diversified portfolio. This is another excellent method as it is a sure-fire, easy way to guarantee yourself some great results. This strategy notably works well alongside the buy and hold strategy; however, your return will be coming primarily from the index’s assets most likely. This allows you to lower the risk rate as you aren’t just investing in a few stocks, but rather a collective of maintainable stocks. This strategy also allows you to easily analyze the portfolio, thus, making it easier to see if you have to change anything drastically.
Index and a few stocks strategy
The “index and a few stocks” strategy is another method that investors could look into if they wanted. This strategy involves using the index fund, but then adding small stock positions to your portfolio. It’s a great way for first-time investors to ensure they are lowering the risk of any losses but also add some exposure to certain stocks that they think will do particularly well. This strategy is similar to buying the index fund as it means less work, and lower risk but overall, you are still receiving a good return on investment. This strategy is great if you are feeling a little ambitious in your investment career and want to make a bold move.
