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How to begin a Successful Investment Journey?

Investment is done keeping one goal in mind: maximum return at minimum risk. The aim of any successful investment journey is to boost your wealth while maintaining a level of risk that lets you sleep at night. There are hoards of investment strategy in the market and the kind of strategy you choose may define everything from what type of assets you have or how you will approach the buying and selling of those assets.  

If you are planning to launch your footstep into the investment world then begin with keeping one thing in mind that it is going to be a successful investment journey with a plan and time frame. You should be aware of your investment journey and how long you are investing for.

Key Takeaways

• The first thing you need before the investment is a plan of successful investment journey. You cannot begin your journey without a proper plan and time frame.
• Learn about the strategies of the market and how it works. Figure out what investment strategy is best for you.
• Be thoughtful about the investment strategy you choose to follow. It will decide your fate in the investment industry.

Investment Strategy

Be clear about your intention behind the investment. Simply saying you want more money out of it won’t help. More specific the objective the better. Before investing your money in any investment strategy make sure that you have a thorough knowledge of the investment strategy.

Different investment strategies are applicable to different investment objectives; the key is to pair the right investment strategy with the right objective.

Types of investment strategies are:

• Value Investing

The core reason behind value investing is simple: buy stocks that are cheaper than they should be. Finding underpriced stocks consumes a lot of effort and time and once you have found them it often takes a long time for their price to rise. 

• Growth Investing

Growth investors are usually looking for above-average growth, through revenues and profits. They are keen on getting higher returns from their investment, even if the share price appears expensive in terms of metrics such as price-to-earnings or price-to-book ratios.

• Income Investing

The purpose of income investing is to create wealth over time. Income investment involves investing in securities that generally payout returns on a steady schedule. Bonds, mutual funds, exchange-traded funds, real estate investment trusts are a few examples of ‘Income Investing.’

• Small-Cap Investing

Small-Cap investment involves purchasing stock of small companies with smaller market capitalization. Small-cap are appealing to investors due to their ability to go unnoticed.

 Know What Works In the Market

Prior to putting your money in any sort of investment strategy understands the purpose behind the investment strategy. Don’t hesitate to take on any investment course if its path leads you to a successful investment journey. Read theories on investment that deal with modern financial ideas. The people who came up with theories (such as portfolio optimization, diversification, and market efficiency) received their Nobel prizes for good reason. The successful amalgamation of science (financial fundamentals) and art (qualitative factors) results in affluent investment.

Once you have a thorough knowledge of the investment market then it is a bit easy for you to come up with simple rules that work for you.

Which Investment Strategy Is Apt For You?

Nobody understands your financial situation better than you. And the most qualified individual who can help you in choosing the best investment policy is you. All you need to do is to take guidance from the experts who will assist you in the process of investment and will make sure that you will get the maximum return out of it.

Fund managers Tom Bailard, Larry Biehl, and Ron Kaiser gave a behavioral model that helps investors to understand themselves.

The model further breaks investors into two personality traits:

Based on these characteristics, investors are divided into five groups:

• Individualist- careful and confident, often takes a do it yourself approach
• Celebrity- a follower of the latest investment trends
• Adventurer- volatile, strong-willed and entrepreneurial
• Guardian- high risk-averse, wealth preserver
• Straight Arrow- shares the characteristics of all of the above equally

Often an individual is good at recognizing the best investment strategy or an individual with good analytical behavior and confidence and has a good eye for value.  A person with the traits of an adventurer can also achieve investment success if the strategy is implemented accordingly. Simply put, regardless of which group you fit into, you should manage your core assets in a systematic and disciplined way.    

Significance of defining the investment strategy

Investment strategy acts like an instruction booklet that guides through the entire investment process. An investment strategy will tell you from time to time that your many potential investments may perform poorly over time or may not suit the investment goals that you are striving to achieve.

While giving thought to an investment strategy make sure that you are quantitatively able to figure out what you are looking to accomplish. The only desire of making money out of investment will be misleading and will not give fruitful results.

Principles of Investment Strategies

You must choose your investment strategy keeping the investing goals in mind. The style of investment you choose is reliable on many factors and these factors are summarized below:

• Long- term goal versus short-term goal

If you are planning to invest in long-term goals then you should go with higher-yielding (but more volatile) instruments like stocks and stock funds. But with some smart steps, you can pursue short-term saving goals too. For example, if you’re saving money for a down payment on a house, you may want to place those savings in a more stable environment, like CDs or a high-yield savings account. Since you are dealing with a shorter time frame for your money to grow with a goal like this, there is less time to predict the volatility of the stock market.

A long-term investment plan can manage the fluctuations in the market. They are going to stay in the market for a longer duration. With long-term saving goals investors need to worry less because shorter-term dips will not affect their strategy. These long-term investments are better served by a mix of stocks and bonds or stock mutual funds.     

• Low-risk versus high-risk investing strategy

Investments are often come with a certain amount of risks. Investors who chase the goal of higher return experience the bigger risk. For example, a bank CD is insured by the Federal Deposit Insurance Corp. It has no risk whereas the stock of a young tech startup is likely to face a higher risk.

Find the Right Investing Path

The investing path you choose is depending on many factors such as your knowledge, personality, and the resources you have. Generally, investors go with one of the following strategies:

• Keep all your eggs in one basket and watch for the basket carefully.
• Don’t put all your eggs in one basket
• Merge both of these strategies by making tactical bets on a core passive portfolio

Don’t be Afraid to Learn

You cannot predict the market, sometimes it is rigid other times it is flexible. There is no rule of thumb that can guide you in the field of investment. Learning to succeed in the investing world is a gradual process and the investment journey is typically a long one. You will encounter a time where the market will prove you wrong. Acknowledge that and learn from your mistakes.

At the End

If you are a naïve investor then you can commence your investing journey without impeding it further. Don’t gamble in the game of investment instead try to understand it. Choosing an investment strategy is no different than choosing an investment. If you ever plan to switch your investment strategy then make sure it is compelling enough to go beyond your core investing strategy. Each investor is unique and the best strategy is the one that works best for their unique investment objectives and tolerance for risk.