In other words, you will be able to make financial decisions with information, criteria, and analysis, which is essential for money to start working for you and to build your wealth.
What are investment strategies:
Investment strategies are understood as a set of processes that allow you to create a portfolio of securities or investments.
In simpler words, they are criteria that will help you choose the best financial assets (fixed or variable income), in which you can successfully invest your money.
It should be noted that most people who want to invest their money and do not have financial knowledge, rely on mutual funds to manage their money efficiently.
If this is your case, you must understand what the investment strategies that will make your money work for you consist of, identify their main objectives and, above all, know which one fits your profile.
Consequently, you must educate yourself on the subject, either by reading financial education books, taking courses, or studying how money works, so that you understand the risk associated with your investments, as well as the expected return.
Types of investment strategies
Although there is a wide variety of investment strategies, it is undeniable that most have one element in common; and it is that each one, in its way, allows you to take advantage of the inefficiencies of the market to obtain great benefits.
However, for this to be possible and for you to make money work for you, you must know how they work, and above all, you need to define objectives that can be achieved, and second, that are measurable and realistic.
Which strategy suits you best?
Before choosing between real estate investments or buying gold, you should know that there are, broadly speaking, two types of investment strategies:
- Passive investment strategies are characterized by reducing transaction costs to a minimum. They don’t require you to update your investments as often, and they have a long-term horizon.
- Active investment strategies that focus on optimizing the estimated return. This implies costs in the short term because you must balance your portfolio, make transactions and review its behavior in the short and medium-term.
So which one suits you best? This will depend on your financial objectives and, above all, on the relationship between risk and return that suits you best.
To clarify this, if you are a conservative investor, you will probably not be interested in trading CFDs, while someone with low-risk aversion will be interested in this market.
Most popular investment strategies
With that clear, let’s talk about investment strategies that will put money to work for you. The idea is that you study and understand them as much as possible before deciding to make your investments, in this way you will ensure that your money can yield the expected results.
1. Invest in the purchase of shares:
Investing in the stock market represents one of the oldest and most effective investment strategies, and therefore, a large part of the population is very familiar with them.
In short, they consist of buying shares on the stock market that allow you to increase your assets significantly.
For this, you must rely on a certified broker , since natural persons are not authorized to carry out these transactions by their means.
Additionally, you should know that you can not only buy shares on the stock market, but also other important investment instruments such as bonds, titles, or certificates.
We have created a beginner’s guide for you to learn how to invest in stocks step by step.
More purchase options:
At the same time, you can buy shares through digital trading platforms, or most safely or conveniently: through investment funds.
Mutual funds are institutions managed by financial experts that help less experienced investors get the most out of their money.
In essence, they have the necessary expertise to define the best purchase offers, as well as the number of instruments to buy, and of course, the expected risks and returns.
So if you don’t know very well where to start investing your money, here we explain what investment funds are and how to choose the one that gives you the greatest benefits.
What does this strategy offer you?
Buying long-term shares can help you retire with an attractive income, or even achieve the financial freedom you long for as soon as possible.
Historically, the annual return on these stock investments averages 6-7%, however, this is not guaranteed.
The magic begins to happen when this profitability accumulates and you manage to make these investments grow with compound interest, which in the long term translates into large sums of money.
2. Invest to generate income:
The generation of income, from the dividends of the shares, is also part of the best investment strategies on the market.
This type of investment is part of the buy and hold projects, and is considered one of the simplest or most sensible investment strategies.
It is characterized by offering long-term returns, so if you are looking for immediate financial satisfaction, that is, making money fast, this is not your best option.
At the same time, it is relevant to mention the Dividend Growth Investing (DGI) strategy, as it also generates income from dividends. Although in this case the investments are made in companies that enjoy important quality criteria.
What does this strategy offer you?
If you make sure to choose companies with low payouts you could make a 50% profit on your investments. In short, you must make sure that your profits are on the rise so that your future dividends grow exponentially.
3. Value Investing, investments in securities:
Financial experts agree that investing in value, or Value Investing portfolios, is one of the best ways to increase your wealth for the foreseeable future.
This mechanism consists of making investments in securities that are usually undervalued by the market, to obtain a great return.
Did you know that Warren Buffet became the richest man in the world after trusting Value Investing? As it is, all he did was buy companies with great competitive advantages at really reasonable prices.
And this is just the nature of this investment strategy: buying something below its real value.
What does this strategy offer you?
Buying companies at value, or companies that have a margin of safety, can give you a higher return than investing in expanding or growing companies.
This is an investment strategy in equities that can help you increase your savings in the long term so that the return to be achieved will be very positive. For this, you must learn to invest in the stock market, to identify companies, and the right times to make your investments.
4. Invest in Trading:
Investments in trading have gained a voracious boom in recent months, especially because they offer returns in the short term.
However, they require a lot of tact, expertise, and practice, otherwise, the risks and losses could play tricks on you.
At this point, the best advice we can give you is that you do not make this type of investment if you do not know the market well, because it is very likely that the results of your actions will be unfavorable.
Know the types of Trading:
Trading is based on the establishment of a price interval, based on an action and a certain time. Today it generates substantial returns, as long as you make investments when said price is at its lower threshold, or sell when it is at its upper threshold.
Several types of trading depend on the trading time, that is, according to the length of time your investments last:
The day trader Refers to price thresholds that vary from day to today. In this sense, if you dare to invest in this way, you will buy and sell assets that enter and leave the market on the same day.
Such assets are often highly liquid and therefore tend to offer you a significant and immediate return if you know how to trade effectively.
Swing Trading: This strategy refers to the repetition of the same operation in the medium term, that is, it will not give you quick results, nor as fast as those of the daily trader.
This means that the profits are really small since they come from market trends that keep a given asset afloat. In general, the terms of the activity of this exchange strategy, or trading, can extend for days, or even for a couple of weeks.
5. Forex Strategies:
Forex refers to currency trading and caters to a globalized market that encompasses all the currencies traded in the world.
These investment strategies are characterized by completely decentralized and varied operations.
Indeed, there are different trading techniques, but this time we will outline two of the most popular and important ones.
The technique of Scalping: This consists of making exchanges or trades through brief and intense periods, to maintain a position for a few minutes.
These are executed by scalpers, whose job is to beat the bid and ask spread, as this earns them valuable profit points before closing the position.
Your job is to make multiple trades, generating profits ranging between 5 and 10 pips, all thanks to the successful detection of buy-sell signals.
What does this strategy offer you?
If you learn to predict the behavior of the forex market, like opening or closing positions in just a couple of seconds, then you will be ahead.
The most experienced scalpers can earn thousands of dollars from their trading operations, but for this, they need to study the market deeply and know-how to trade with impressive speed.
Day trading: This is another of the most lucrative and bold Forex investment strategies you can imagine, were trading positions inexcusably close before the end of the day.
The objective is to reduce the risks of very drastic movements occurring overnight, which end up significantly affecting positions in the market.
In this sense, the broker must study said positions for several hours, and keep an eye on the opening and closing of high-risk daily operations.
The best recommendation we can give you if you are thinking of taking advantage of intraday trading is that you study the liquidity and volatility of the market (this refers to its fluctuations or movements).
If you follow it, you could successfully close positions daily, so that your profit margin would be favorable, and above all, scalable.
6. Technical analysis:
These types of investment strategies are based on the evaluation of investments. In other words, financing is evaluated to identify new business opportunities.
Technical analysis is done through statistical analyzes of such trading activities; although other factors should also be considered, such as:
- Price variation.
- Volume.
With technical analysis, the evolution of a value in the future can be predicted, taking into account the behavior it has had in the past.
This financial method is very useful for those who make investments in the stock market since it allows them to rigorously identify bullish or bearish trends.
At the same time, it should be noted that two other important investment methods emerge from technical analysis. These are:
Graphic or chartist analysis: It is used to analyze the price charts of a certain asset, to know the degree of liquidity of a market.
Fundamental analysis: Fundamental analysis is another investment strategy that you should not overlook if you are interested in valuing companies that are listed on the stock market.
It is based on the study of fundamental data that provides clear and precise information on the performance of companies.
Those who want to make long-term investments, such as buying shares, can take advantage of this method to find out the earnings ratios of some companies, as well as their growth prospects, or their market price.
What does this strategy offer you?
People who rely on technical analysis, as an investment strategy, will have access to valuable indicators that will show them how the prices of some financial instruments change, such as:
- Bonds.
- Actions.
- Foreign exchange.
In fact, through graphs, they will visualize price trends and data from other years, to identify patterns.
7. Buy and Hold:
The literal translation is “Buy and hold”, and that is precisely what these types of investment strategies consist of.
The idea is to acquire values that can be retained in the long term. That way you could take advantage of your income or dividends.
However, the acquisition value is great because investors who apply this strategy look for stable companies with an excellent position in the stock market.
The key is that companies do not have debts and that they offer good returns or benefits.
What does this strategy offer you?
By using this strategy, the transaction costs for the sale of securities are reduced, since these are maintained over time.
Therefore, those who apply it should not be aware of market increases, because the objective is to retain values in the long term, or until detecting a considerable economic improvement.
At the same time, you will be able to boost your investment portfolio in an effective, sustainable, and responsible way.
8. Momentum:
It works by following trends. In addition, it is useful to invest in stocks that, at that moment, show great potential for an increase in their price.
The goal is to obtain an almost immediate profit. That is, take possession of potential shares and sell them as soon as they start to show a downward trend.
For many, it is an impulsive strategy whose investment horizon is short-term. Did you know that in the 90s, specifically in the United States, this strategy was very popular?
Indeed, at that time the financial markets showed upward trends, and therefore, many people trusted her to invest their money.
What does this strategy offer you?
The Momentum strategy does not have a long-term spread. So, if you apply it, you will receive profits immediately and this, in turn, will allow you to repeat the investment cycle.
Another of its advantages is that you can invest in several financial assets that have potential, and that also tends to rise.
Additionally, the uptrend is likely to continue in the short term. Therefore, its market price will improve and your investment could be profitable.
9. Contrarian Investing:
It can be said that it is one of the riskiest investment strategies because it consists of investing in those companies, shares of companies, which suffered market punishments, due to a particular event.
So what would be the gain? Well, whoever applies it will wait for that company to recover its value and will finally put it up for sale, which will allow them to recover their investment and take advantage of the surplus.
According to a report by Entrepreneur, Contrarian Investing is the investment strategy that large investors have applied throughout history to obtain millionaire profits.
What does this strategy offer you?
The investor will always go against the market. In essence, he will give a new opportunity to that company, which despite having been abandoned, continues to be solid.
However, you will need to do some stock analysis to find out what caused the market to lose interest.
In other words, you will have to determine if it was due to something circumstantial, or if the abandonment was linked to a structural problem.
On the other hand, you must be willing to make long-term investments, because in this case, you will not know when the company will fully recover.
You would practically have to wait until those actions materialize and reach the desired potential.
In this type of investment strategy, sales are made when the market has great momentum; so if you are a patient investor you could feel comfortable with them.
10. Invest in small businesses:
Investing in large companies requires more financing, and therefore not everyone can take advantage of this investment strategy.
For their part, small companies tend to offer better returns, to the size of market capital.
What does this strategy offer you?
- It allows you to invest money in a small but promising company.
- Being small companies, the acquisition value is usually low.
- You could not only inject capital into them but also add value through your expertise, advice, etc.
- Keep in mind that small companies’ need for capital tends to translate into profits for investors.
How to know more about investment strategies
To learn more about investment strategies you can look for books and online courses that train and train you in specific topics. Here are some recommendations:
Book: Investing Strategies Guide: Understanding the Markets, Risks, Returns, and Behaviors
It is written by Peter Stanyer and includes a large number of case studies and detailed analyses on how to develop the most appropriate investment strategies if you are an individual investor.
Through this guide, you will be able to know what are the risks and opportunities offered by less complicated investment strategies.
And as if that were not enough, you will also have access to important recommendations that will be very useful if you are looking to venture into more sophisticated strategies, or with stricter approaches.
Define your investment strategies
In conclusion, if you want money to work for you, maximize your capital, stabilize your finances, or increase your assets, you should dedicate yourself to defining the investment strategies that best suit you in the short, medium, or long term.
And here it is valid to highlight that you can combine several strategies, instead of focusing on taking advantage of only one, but everything will depend on your requirements. For example, you can invest in the stock market as well as invest in gold.
The idea is that you raise your bets and obtain a more favorable result, but the wisest thing is that you do not risk too much, much less improvise financially.
So if you do not know what the best strategy is for you, it is best to seek advice from an experienced investor so that your operations are very successful.
