The secret of successful investment activity lies in the right strategy. Absolutely every trader is faced with the task of competently distributing capital over assets and choosing the intensity of their purchase / sale. Knowledge of investment strategies and their combination – this is without which it is impossible to achieve success on the stock exchange.
It is very important not only to have theoretical knowledge, but also to be able to apply it in practice, adapting it to the existing economic realities. The main thing is to choose the optimal ratio of your actions.
Investment strategies are divided into types based on two basic factors:
- Projected return on investment
- Potential risks of capital loss
The main types of investment strategies
In economics, it is customary to distinguish 4 types of investment strategies:
- Conservative (passive)
Each of the strategies has a direct proportional relationship between potential risks and the level of profitability. Simply put, the higher the risk for a particular investment, the more profit it can bring. The same thing works in the opposite direction: the lower the level of risk, the lower the profitability of the instrument.
Let’s consider each of the strategies separately.
Conservative (passive) strategy.
The conservative investment strategy is characterized as the least profitable. The level of its profitability is approximately 15-20% per annum.
Its essential advantage is its minimal riskiness. In other words, investments of this type do not threaten you with the loss of invested capital.
The most common examples of conservative attachments are:
- Purchase of gold
- Purchase of platinum
- Shares in conservative mutual funds
- Bank deposits (deposits)
- Government bonds
- Investments in real estate
A moderate investment strategy is characterized by higher returns. Here, as a rule, we are talking about 20-45% per annum.
Based on the above, you already know that as profitability increases, so does the potential risk. Unlike conservative deposits, moderates are no longer completely safe.
Moderate financial instruments include:
- Contribution to microfinance organizations
- More profitable units of mutual funds
An aggressive investment strategy is characterized by the highest possible profitability. In terms of numbers, this is approximately 45-50% per annum. Based on practice, we can safely say that often, the profitability of such a deposit is much higher than the announced figures. In some cases, it reaches 100, 300 and even 1000% per annum.
It is very important to understand that making such a profit, the investor faces very high risks. In rare cases, the values tend to the absolute, that is, 90 or even 100%.
A classic example of aggressive instruments is:
- Financial pyramids
- Binary options
It is impossible to consistently receive high income using any of the above strategies in its pure form. Absolutely any truly successful investor will agree with this. A balance should be sought in everything. Using all types of investment, in certain proportions, you can find the ideal option.
A mixed investment strategy includes elements of several types of financial instruments that differ in profitability and riskiness.
The main task of any investor is to form his own optimal investment strategy. Of course, there is no golden rule here, and there cannot be. Moreover, it can take years to find the perfect one.
What should beginners do who have neither experience nor knowledge yet? How to form an investment portfolio?
We offer you a classic investment diversification option developed by New Rich Markets. In accordance with it, you must build your portfolio using the following financial instruments:
- 55-60% – conservative
- 30-35% – moderate
- 5-10% – aggressive
Based on the practice of our clients and the diligence of the analytical department, we can say that this combination is quite safe, but at the same time quite profitable.