The art of getting high returns without risking it all is not something that every investor knows. In order to understand which investment strategy works the best for you, there are few important questions you need to ask yourself; What is my risk tolerance? What could my investment type be? Is it going to be consistent or a one-time deal? Is it going to be a long-term or short-term investment?
Finding answers to these questions could be your first step towards financial planning. There are different investment strategies and when it comes to investment strategy there is no one such exact strategy that could work out well and prove to be profitable for everyone. So here we are with a list of investment strategies that you could customize based on your financial plan.
Principles of Investment Strategy Goal-Based
Investing without a financial goal can be similar to shooting an arrow without an aim. It is important to classify your financial goals into long-term and short-term goals and plan your investment strategy accordingly.
Risk Return Spectrum Based
Risk tolerance is something that investors have to take into utmost consideration. For a financial portfolio to be wholesome, it must consist of low-risk and high-return investments. In order to gauge risk tolerance, it is necessary to take into consideration the age, income flow and financial needs of the individual. Therefore, investors might have similar strategies but not the same financial plan. If you consider yourself to be a risk-averse investor, consider investing in low-risk investment options like government bonds and fixed deposit.
5 Best Investment Strategies
Portfolio Diversification
Balance is the most important factor in all aspects of life and the same is applicable to your investment portfolio as well. The Modern Portfolio Theory works on this principle. The best investment strategy to get the highest possible returns without putting yourself at extreme risk would be to opt for portfolio diversification. When it comes to portfolio diversification, it is necessary to gauge the risk of your investments and make sure they weigh the same. For instance, you can invest in a high-risk investment which gives extremely profitable returns and invest in a few low-risk investments that could be your pillar of support in case of few unfortunate financial emergencies.
Goal Based Investment
Planning your investment strategy based on your goal, be it long-term or short term by taking into consideration the risk, returns and market conditions can be the ideal way to strategize your goal-based investment. This could be considered the best investment strategy if you are planning to have more short-term goals than long-term goals.
Income Based Investment
An income-based investment strategy is one wherein the investor invests in assets that generate profitable income. The investment be stocks, dividends, bonds and much more. As always make sure to personalise your income-based investment strategy by taking into consideration your risk tolerance and financial needs.
Building a Retirement Fund
This could be a futuristic investment strategy wherein you need to consider the current market conditions and future financial needs and make sure to include investment plans that help you get funds for the future without compromising on your current financial needs. This requires a long-term financial plan as investors have to take into consideration the fact that this could be their sole source of finance post-retirement.
Growth Value Investment
This is the strategic investment plan wherein an investor identifies and invests a promising investment plan which is priced below the value and could be expected to grow in future to yield better returns. This is the best investment strategy for people who are looking forward to investing in a high-risk investment as these investments could either make you rich overnight or could take a worse downturn.
Invest Now and Enjoy Profitable Returns
As Sun Tzu says “Every combat is already won before it is fought”. With the right strategy, an investor can make profitable returns. It is also necessary to monitor and make necessary changes if there is a need at regular intervals of time. No matter what your investment strategy could be, investing in a fixed deposit could be a safety net that helps you from completely exhausting your finances in times of a financial downturn. Shriram Finance offers attractive interest rates reaching up to 9.40%* p.a. Investors can also calculate their interest returns before investing with the help of our Fixed Deposit Invest Calculator.
Key Highlights
- Portfolio diversification can be one of the best investment strategies for investors
- Investors need to maintain a balance in their investment portfolio so as to have a secure financial future.
- The best investment strategy can differ from investor to investor; it is dependent on their risk tolerance and finances
- It is advisable to have a low-risk investment that could come in handy at times of financial crisis
FAQs
1) What is the 60/40 rule in investing?
In a 60/40 portfolio, you allocate 40% of your funds to bonds like fixed deposits and 60% of your funds to equities like stocks. The 60/40 split is designed to reduce risk while still generating returns, even during times of market turbulence.
2) What are the three everlasting investment rules?
- Maintain a small sum in a quick-access emergency fund.
- Pay off all of your debts.
- The sooner you organise your daily finances, the sooner you can start investing.
3) What exactly is a lazy portfolio?
A group of investments that largely operates automatically is known as a lazy portfolio. Investors don't have to make large adjustments to their asset allocation or goals while using lazy portfolios because they are built to withstand shifting market conditions.
4) Which investment strategy is the safest?
Diversification is the simplest answer. According to MPT, you can hold a high-risk asset class by yourself. However, when paired with other investments, the portfolio can be adjusted so that its risk is lower than some of the underlying assets
