As a person, as an investor, you’re completely different to anyone else…
As corny as it sounds, everyone is indeed, unique. Which is why, if someone tries to tell you that their investment strategy is best, you should know that whatever their investment strategy is or claims to do, it may not necessarily be best for you.
Not only are your personal circumstances different from anyone else’s, so are your investment objectives, your tolerance for risk, and the timeframe in which you wish to achieve your goals. So, instead of looking for one investment strategy that is ‘best’, we’re exploring some of the most common investing strategies to support your research in finding the approach that is best for you.
It’s important to remember, when planning your investment strategy or making an investment decision, you should always consult a professional financial adviser to ensure your developing a strategy best suited to your own circumstances and risk appetite.
Bearing that in mind, here are the top 6 most common investment strategies and what they offer:
1. Fundamental analysis
One of the oldest and most basic investment strategies, fundamental analysis involves researching and analysing stocks. Data from a company’s financial statements is compared with past and present data from that particular company or with other companies within the industry, to determine a reasonable valuation for that company’s stock and whether it is a good purchase or not.
2. Value investing
The value investor looks for stocks or assets selling at a ‘discount’, offering the potential to pick up a ‘bargain’. To make this work, the investors must know the intrinsic value of a stock, so they can buy a quality stock or asset for a reasonable or discounted price, close or preferably less than its intrinsic value. This type of investment is usually long term, allowing investors to be less concerned with market fluctuations.
3. Growth investing
Typically performing best in the mature stages of a market cycle when the economy is growing at a healthy rate, growth stocks or assets are those that offer future growth prospects. With less of an emphasis on current price value, growth investing may involve buying high, but the expectation is that the purchase will continue to grow when the environment is right.
4. Technical analysis
Often considered the opposite of fundamental analysis, technical analysis is an investment strategy that uses charts to recognise recent price patterns and current market trends to predict future patterns and trends. By recognising certain cues or signals, called indicators, these investors predict forthcoming patterns and invest accordingly.
5. Income investing
Investors interested in income investing choose investments that provide a steady stream of income. To do this, they will often weigh up characteristics such as yield, past consistency of past performance and growth and earnings to determine if a prospective investment is fit for their portfolio.
6. Buy and hold investing
As a passive investment strategy, buy and hold investing is a long term investment style. Buy and hold investors believe time in the market offers more return on investment than timing the market, so will hold onto their investment over time, riding out short term volatility.
How to find the best investing strategy for you
Of course, there are many other investment styles and strategies out there. Indeed, far too many to list here. So, how do you work out which one is right for you?
When planning your own investment strategy or making an investment decision, you should always consult a professional financial adviser to ensure your developing a strategy best suited to your own circumstances and risk appetite.
Your financial adviser or planner can work with you to develop your investment strategy by helping you to identify your investment objectives, timeframes, preferred investment type or asset class and most importantly your tolerance for risk.
For more on investing strategies, check out why a financial adviser needs to be an important part of your life plan or learn more about Trilogy’s Managing Director’s own investment strategy.
The material on this website is intended only to provide a summary and general overview on matters of interest. Trilogy is only licensed to provide general financial product advice on its own products and does not consider your objectives, financial situation or needs when providing any information or advice. You should consider whether the advice is suitable for you and your personal circumstances and we recommend that you seek personal financial product advice on your objectives, financial situation or needs and obtain and read the relevant product disclosure statement before making any investment decision.