A comprehensive investment strategy is a set of procedures designed to help you allocate your resources toward specific financial objectives. It involves balancing risk and reward, time horizons and personal preferences. An effective strategy can reduce emotional investing decisions and improve overall portfolio optimisation.
There are many investment strategies available, but the best one for you depends on your unique circumstances and goals. Your time horizon, family obligations and lifestyle are important considerations, as are your tolerance for risk and the amount of work you’re willing to put in.
Many investors adopt a buy-and-hold strategy, buying low-cost, diversified index funds and sticking with them over the long term. This approach is based on the belief that market history shows stocks tend to return an average rate over time, regardless of periods of volatility or decline. It also assumes that trying to anticipate market changes or making opportunistic investments is often difficult and counterproductive.
Dividend growth investing is a strategy focused on companies that pay regular dividends, often to shareholders as a percentage of the company’s earnings per share. This type of investing is based on the idea that dividends can help offset the impact of stock price fluctuations and add to returns over time. Investors who reinvest their dividends can enjoy the compounding effect of this investment strategy, which is why many companies offer dividend reinvestment programs.
Value investing involves looking for undervalued shares of established companies or burgeoning economies that have yet to make a large mark on the global economy. These stocks are typically more volatile, but can yield higher returns over the long term than their larger peers.