Exactly What Are Different Trading Strategies?

  • October 20, 2020

However, history shows that when investors attempt to time the market to maximize gains and minimize losses, they often end up doing the exact opposite. If you honestly can’t stand any loss, check out a money market account and park your cash and earn the best rate you can get. Bonds are a little more risky, with bond funds definitely susceptible to loss. For a 20+ year portfolio, you should pick an investment allocation that is almost exclusively equities and real estate. Low cost index funds, maxing out retirement and tax deferred savings vehicles, and even consider business ownership.

Granted, buy-and-hold only works if investors still believe in their investment’s long-term potential through those short-term dips. These investment strategies will help investors make the most of their portfolios. The buy-and-hold investor will argue that holding for longer periods requires less frequent trading than other strategies.

Growth investing involves buying shares of emerging companies that appear poised to grow at an above-average pace in the future. Companies like this often offer an unique product or service that competitors can’t easily duplicate. While growth stocks are far from a sure thing, their allure is that they can grow in value much faster than established stocks if the underlying business takes off. It’s always nice when things have a clear label, and you can’t get much clearer than “buy-and-hold. ” Buy-and-hold strategists seek investments they believe will perform well over many years. The idea is to not get rattled when the market dips — or even drops — in the short term, but to hold onto your investments and stay the course.

At the 20 year time horizon, your portfolio should be mostly assets that have growth potential, and may be riskier as a result. Equities and leveraged real estate are prime examples of assets you should focus on.

Stocks are small pieces of a company that investors buy in the hopes that the company will succeed and its stock, or share, value will go up. Stocks give companies the opportunity to raise money to support their businesses, and they give investors the ability to increase their wealth (provided the stock’s price indeed rises).

As you can see, assets like stocks have a great average return versus cash. However , cash won’t lose you money, where you could lose money in stocks in an one year period of time. This is one of the strategies I recommend because it’s perfect for long-term investors. That’s because I’m not worried about my investments going up this month and down the next—I’m looking years, maybe decades, into the future.

If you don’t invest in a portfolio of diversified investments, do you increase your risk of losing money? That’s why, as you setup your investment strategy, you need to take your risk tolerance and time horizon into consideration.

Investment Strategy

Together, growth and aggressive growth mutual funds should make up half of your retirement portfolio, split evenly between the two types of funds. That way, you still have the potential to invest in exciting up-and-coming companies and industries while softening the blow when those mutual funds aren’t performing as well.