INVESTINGLIFESTYLE & TRAVEL

8 Investment Strategies for Beginners

Are you considering investing? If you don’t know where to start, check out our latest article to learn about different ways to strategize your investing to get the most out of your money!

If you’re new to investing, it can seem overwhelming. Before you even consider investing, it’s important to make sure you have paid off any high-interest debt, established savings, and created an effective budget to increase your risk tolerance. Risk tolerance is defined by Investopedia as the degree of risk an investor is willing to endure given the volatility in the value of the investment.

Once you have completed those three initial tasks, it’s important to consider why you want to begin investing. Try asking yourself the following questions to determine why you’d like to invest:

• What is your goal?
• Do you want to retire early?
• Do you want to be financially free?
• Would you like to live off passive income?

Answering these questions could help you understand how you will approach the vast world of investing. Read on to learn about eight investment strategies so you can choose the best option for you and your financial goals.

Focus on retirement

Prioritizing your retirement can set you up for future success. This style focuses on secure, time-based investments such as a 401(k) or an IRA. Since these investments are secure, they may limit potential growth through other avenues such as stocks.

Buy-and-hold

This strategy focuses on the investment doing well over many years. Even with ups and downs in the market, the buy-and-hold investor will wait until the market recovers after a downturn, believing that long-term gains will outweigh the short-term decline.

Active

Unlike the buy-and-hold investors, active investors will take advantage of short-term gains by acting aggressively when buying and selling different assets. This investor focuses on closely following trends including day-to-day movement in the stock market and current events to capitalize on market fluctuation.

Dollar-cost averaging

This investment strategy takes out timing the market and focuses on consistent investments over time. This type of investor focuses on creating a set amount they will invest weekly or monthly, which averages the cost of the purchase of the shares over time. Read our Dollar-Cost Averaging article to learn more about this style.

Index

Index investing is a great way to diversify quickly as these investors focus directly on investing in index funds, mutual funds and exchange-traded funds (ETFs). These types of funds are made up of a collection of securities (stocks and bonds).

Growth investing

Growth investors choose to focus on emerging companies that are growing fast. These investors focus on the potential of the company stock, often with a higher risk/higher reward mentality.

Value

Value investors focus on stocks they think are undervalued and have the potential for long-term returns. Value investing requires a person to be actively involved in the market, watching trends and doing research to find the best value for their long-term goals.

Socially responsible

Socially responsible investors usually steer investments toward company stocks that align with their values. For example, they may focus on companies that consider climate change or ones that work to make a positive change in society.

When considering how you want to invest, which of the eight different strategies do you think will work best for you? There is not a one-size-fits-all approach when it comes to investing and it may take some time to figure out which strategy is the right one for you. When investing, be sure to diversify how you invest the same way you diversify your portfolio, and consider giving one of these eight methods a try.

Sources:

https://www.nerdwallet.com/article/investing/investment-strategies

https://www.investopedia.com/investing/investing-strategies/

(https://www.investopedia.com/terms/r/risktolerance.asp