what is the best investment strategy?

Investing is a topic that more and more people are trying to get a better understanding of. This is a tool that can unlock new possibilities in persons life. And as such, many are asking – what is the best investment strategy. 

Investing is a key aspect of personal finance. This can allow you not only achieve your financial goals but also unlock a path to financials freedom and wealth.

There are so many investment strategies which can make the topic overwhelming for some of you out there.

Below I will review many strategies that people use when it comes to investing. I will also share what factors from your personal life you should consider when choosing the strategy that would work the best for you.

what is investing and why is it important

I will start with explaining what investing actually is. This is not only the stuff you see in the movies where people are studying candle stick charts on 6 screens at the same time. This more often is trading rather than investing.

Investing is the process of using your money for the purposes of earning more money. There are many variations of this and some can include the likes of buying company stocks or other types of financial instruments. You can also invest in the likes of art, property and even cars.

The goal of the investor is usually to gain a financial benefit over a certain period of time. This can be either through the asset appreciation or the passive income some of these investments can bring.

All of the above can help the investor on his or her path to wealth and financial freedom. This can also be used for the purposes of retirement planning. Others are simply looking for a way to offset the impact of inflation and the cost this can have on you and your money.

factors to consider for your investment strategy

When it comes to investing – there are a couple of things you should consider before deciding on what is the right investing strategy for you.

The first point on the list – your risk tolerance. This is extremely important to learn. The last thing you want – investing and loosing sleep over it. There is however a rule in the market – the higher the risk you take, the higher the potential return you can expect.

Next in my view – the time you can invest for. This should be one of the first considerations when choosing any investment. There is no point looking into 20 year long bond if you can only invest for 5 years. If however you are investing for your retirement – this might be a great option depending on your risk tolerance.

The last point I would definitely consider before investing – what are your financial goals. This will play a key role in deciding what investing strategy is right for you. 

For example, if you are looking to buy a home – LISA that holds cash assets like bonds can be a great option. While if you are looking to buy a property in the near future buying individual shares might not be the best way forward.

This additional point will be important to some but not others. Personal preferences can play a role in your investing strategy. 

I personally know some people who will not invest into sin companies no matter how great the investment might look like. Their moral values are more important than the returns they can make. The sin companies I refer to are oil, tobacco or alcohol linked.

investment strategy options

When it comes to picking the right investing strategy for you – the good news there are many to pick from. I will cover some of these with key benefits and risks I see.

Index Fund investing – strategy advocated by Warren Buffett himself. This strategy is for those looking to invest into the stock market and are looking for a diversified portfolio. I consider this strategy low risk if you have a long enough time frame for this.

Dividend Investing – this strategy focuses on stocks or ETFs that pay a dividend to their holder. This is a great way to boost your income through dividend payments that will keep coming in even while you sleep. This can be a great long term strategy where returns can become really impressive.

Growth or value stock investing – strategy that looks at finding either significantly undervalued or stocks expected to deliver impressive rates of growth. These strategies in my view are more advanced and should be used by experienced investors. These can deliver great returns however come with higher levels of risk as well.

Real Estate – this is another well known and popular option for those looking to grow their net worth. There are many ways to go about it – investing with the intent to benefit from flipping, increasing value through improvements or rental income. You can also combine all 3! This strategy can work for both long and short term investors. The biggest downside of this strategy however are the high costs to enter this market.

summary

Investing can be a tricky topic to start with. Finding the strategy that becomes your best investing strategy is vital in order to succeed.

Firstly, decide what is it exactly you are investing for and how much risk you are willing to take. Consider the time available in this formula as well.

Very often – index investing is where many people start due to the low risk nature of this over longer periods of time. If this sounds about right for you – consider opening your ISA account a brokers and get started.

Vanguard is a great platform for this – they offer a wide range of products. On top of this – they are known for their low cost structure due to the passive management approach when building their products.