The Best Investing Strategy For Beginners

The sooner you start investing the better but for many first time investors the language can be daunting. And the risk of losing your money through a lack of understanding and knowledge can be off-putting. Investing in anything requires some degree of skill and here we look at the best investing strategy for beginners.

First of all what do you hope to achieve with your investments? Work out your goals – will you be buying a home? Is it for retirement? Knowing what your goals are will help you make smarter investment decisions.

If you have a dream of becoming rich overnight this is highly unlikely. While it is possible it is also very rare. It is wiser to invest your money in a way that it will grow slowly over time. Get rich quick schemes are highly speculative and high risk.

Make sure you start saving regularly and always put money aside. This is commonly known as ‘paying yourself first’. You can start with a small sum and increase it over time. Make this an automatic habit and soon you won’t even notice the funds coming out of your account. But you will notice when it starts to grow! Invest this each and every month – you’ll be glad you did.

All investors should look at diversifying their investment. Diversifying means having a mix of investments in different asset classes and not exposing your money to the risks of one asset. Assets classes are the categories of investment you can use such as equities, bonds, cash, property, commodities and so on. Each asset class has a certain level of risk. Cash will have the lowest risk, followed by bonds, property and equities.

The best way for a beginner to get this diversification is with the use of mutual funds, also known as managed funds or unit trusts. These types of investment are particularly good for beginners who will usually have small amounts to invest. Mutual funds allow small drip feed investment in a range of assets to suit an investor’s risk profile. A risk profile is the amount of risk you are willing to accept with your money – the amount you are willing for it to lose in value at any time.

What is the Best Investment Strategy For Me?

I often hear clients asking what is the best investment strategy for their particular circumstance and it Raises the question. What is the best Investment Strategy?

My response is always “All of them”. How can I say that? Well a diverse wealth portfolio will always provide the best of all worlds.

I have a friend who will swear black and blue that Property is the way to invest. Well there are actually two types of property investors. The “passive” investor is the type of property investor that buys a property with a view to collect the passive income and accumulate capital growth over the long term. An active Property investor is the type of investor that actively looks for deals coming onto the market, will purchase an option on that home, usually with extended settlement and then sell for a profit.

Some choose the stock market. There are also two ways to invest into the stock market. Most Mum and Dad type investors look at purchasing a “Blue chip share” with the long term view of holding that share for the long term, again the strategy here is to earn long term growth. The second option within stocks is to choose a short to mid term investment strategy and trade on a day to day scenario. This type of investment strategy can be one of the most thrilling and exciting strategies there is. It also carries with it the most risk and those that become victims of the global financial crisis are testament to that risk.

Business is also an excellent investment strategy. It is an often overlooked way to invest funds, however there are more and more vehicles becoming available to invest into multiple levels of business with minimal risk and maximising returns.

The key to any investment strategy is to choose wisely and diversify your portfolio. Even starting on a small scale, you can choose to invest into “smart” investments that minimise risk and maximise your return. The trick is to do your homework, set goals and choose wisely.

Best Investment Strategy For the Future

The best investment strategy focuses on strategy and asset allocation, not on picking the best investment year after year. Few people really have any investment strategy at all, and they lose money in years like 2008 and 2009. If you want to make money in your investment portfolio in the future, and sleep at night, read this. I’ll keep it simple.

The best investment strategy is not about pulling your hair out to find the best investment or even the proper asset allocation or investment mix each year. That’s a formula for frustration. Instead, the MOST IMPORTANT thing you can do in the future, your best investment strategy, is much easier and requires no crystal ball. It starts with simple asset allocation; and then comes the important part. First I’ll tell you why most people have lost money in recent times, and then I’ll tell you what you can do to make money in the investment game without sweating the details.

Most people invest much like they play any other game they don’t really feel up to speed on. If they go into the game with a plan of action, they fall apart as soon as the unexpected happens. Then, they REACT as their emotions take over. That’s what investors as a group have done in recent times. They’ve sold stocks and stock funds out of fear because the stock market went south; and put this money into bond funds for greater safety. The end result was predictable using hindsight, because this has happened before.

Once again the average investor sold stocks when they got cheap, and will likely start buying them again when they feel that they are missing the boat. At that point in time stock prices will likely be high and ready for another tumble, if history again repeats itself. Now, let’s focus on the best investment strategy for getting and staying on track in the future. Asset allocation refers to how you invest your money across the asset classes… stocks vs. bonds vs. truly safe and liquid investments. Even if you just invest in a 401k plan or in other mutual funds, the following investment strategy is available to you. To keep things real simple, assume you’re looking at your investment options in your 401k or fund company you invest with. The options will be similar.

What percent of your total investment portfolio are you willing to put at risk to earn more vs. what percent do you want safer vs. how much do you want really safe? Let’s say you’re willing to put half at risk, but want the other half as safe as possible. Your asset allocation: 50% to stocks funds and 50% to a money market fund or stable account if you have one available. That’s how you allocate the money you already have invested, and that’s the way you allocate any new money you invest periodically.

Once you have repositioned your money to 50% stocks and 50% safe, the really important part of your ongoing investment strategy comes into play; and here is where investors drop the ball. At least once a year, or when the stock market action is extreme, check your asset allocation percentages. REBALANCE if you are not still close to 50-50. If you had done this in the recent past, you would have made money in your investment portfolio. You would have made money in the past decade as well. Here’s how the rebalance part of our best investment strategy would have worked with the 50-50 example in 2008-2009.

If you went into 2008 at 50% stocks and 50% safe, by early 2009 your safe investment would have been worth more than 50% of the total vs. your stock funds since stocks took big losses in that time period. To rebalance you would have moved money from the safe side to your stock funds to make both sides equal again. In other words, you would have bought stocks cheap. Then a year later in early 2010 your stock funds would have accounted for well over 50% of your total, since stocks soared the last 9 months of 2009.

So, with things again out of balance you rebalance again in early 2010, which means you move money from stock funds to the safe side and lock in some profits. As a long term plan this is your best investment strategy because it has you buying stocks or stock funds when prices are lower, and taking profits when stock prices have risen. Emotion and guess work are taken out of the picture. Focus on balance and rebalance. Some 401k plans and other retirement programs offer this service and will automatically do it for you per your instructions at no cost.

What is the Best Investment Strategy?

At first glance the best investment strategy in late 2007 was to sell every stock investment you held; and the best strategy in early 2009 was to put 100% of your investment portfolio into stocks. The result would have been no investment losses in 2008 and big profits in 2009 and early 2010. Your odds of doing this without a crystal ball were about zero. But with a simple and sound investment strategy you can make the best of any market situation.

The best investment strategy is not a formula that tells you when to dump one investment asset and when to buy and hold another on a short term basis. Trying to time the markets is speculation and beyond the scope of sensible investing for the average investor. What you need is a longer-term sound plan that only requires minor adjustments over time. Let’s look at the key elements to putting together your best investment strategy for long term profits with less risk.

You must take risk into consideration when judging the results of, or putting together any investment strategy. Our crystal ball scenario went from an asset allocation of zero for stock investment to 100%. Not only is this strategy very risky, it is also short-sighted. It begs the question: what do you do in 2010 and beyond? When do you cut your stock investment and run, and where do you go next? Overstay your welcome and your stock investment profits could evaporate in a few months, because the truth of the matter is that you have no long term investment strategy at all.

As an average investor, taking risk without a plan is not the way to play the investment game. It’s your money and it’s important to you. View putting together your best investment strategy like this: you want to earn in the neighborhood of 10% a year over the long term taking only a moderate amount of risk. This means that you will likely never make 50% or more in a year because you have no crystal ball. It also means that you have a real good chance of avoiding big losses that can upset your future financial plans (like a secure retirement) as well.

Every good investment strategy focuses on asset allocation. This means that you allocate your money by diversifying and spreading it across all four, or at least three of the asset classes. Starting with the safest these are: cash equivalents, bonds, stocks, and perhaps other investments called alternative investments (like real estate, foreign or international securities, and gold). The simplest and best way for you to do this is through mutual funds that invest in each of these areas: money market, bond, stock, and specialty funds, respectively.

For example, if you want relatively low risk and simplicity you might allocate 1/3 each to a money market fund, a bond fund, and a stock fund. At the beginning of each year you review your investment portfolio to make sure your asset allocation is on track. If, for example, your stock investment has grown from 33% to 40% of your to total investment value, move money from your stock fund to the other two to make them all equal again. By doing this you are taking money off the table from your riskier stock investment when the market gets pricey, and adding money to stocks when prices are lower. In this way you have lower risk, no need for a crystal ball, and you know exactly what you are going to do each and every new year.

If you feel the need to keep it simple, do so as in our example above. If you want to take the best investment strategy to the next level include international stock funds and specialty equity funds like real estate and gold funds. The added advantage here is that in the past these alternative investments have proven to have the potential to offset losses when stock prices in general are falling. In short, they offer even more diversification to your asset allocation.

The Best Investment Strategy For the Clueless

Your best investment strategy if you feel clueless could be the simple investment strategy or “rule of thumb” that’s been around for years. Here we explain the basics of this strategy, and then get into how to put it into action without stress or strain.

It’s nice to have a basic guideline to go by when managing your investments. Traditionally, the most basic guideline has focused on two things: the need for balance in an investment portfolio and the age of the investor. Simply put, your best investment strategy is a function of these two factors. Balance is a way to control risk while earning higher long term returns. The traditional approach to investment strategy focuses on owning both stocks and bonds to achieve balance, since losses in one of these investment options is often offset by gains in the other.

Age is taken into consideration because it is assumed that younger investors can afford to take more risk in pursuit of higher returns in order to accumulate a larger nest egg for retirement. After all, earning 5% a year $10,000 grows to $43,000 in 30 years vs. $174,000 at 10%. If you are young and experience a setback you’ve got plenty of time to make up for it. When you are older this is not the case – you need less risk, more safety, and income.

Stocks are the primary investment of choice for young investors, and over the long term have returned 10% on average per year. On the flip side, bonds are preferred by oldsters, and have returned 5% to 6% on average over the years at a lower level of risk. In putting together your best investment strategy the traditional question becomes: how much of each of these two investment options should you hold in your investment portfolio? Here’s the traditional rule of thumb.

You should allocate a percentage to bonds that is equal to your age, with the rest going to stocks. In other words, the best investment strategy for a 20-year old is 20% to bonds and 80% to stocks. At age 60, you want 60% in bonds and 40% in stocks; and at age 40 a ratio of 40% bonds and 60% stocks is your best investment strategy. That’s the rule of thumb that’s been around at least as long as I have, and I’ve been into investing for 35 years. There are no guarantees in investing, but keeping the above guidelines in mind should keep you out of major trouble over the long term.

Over time you need to invest more conservatively as you age, so you need to adjust your portfolio over time to reflect this. Now, how can average or even clueless investors set up their best investment strategy without picking the individual stocks and bonds to invest in? The simplest way is through mutual funds: bond funds, stock funds, or balanced funds. Mutual funds pick the stocks and/or bonds for you and handle all of the management details. In fact, the traditional balanced fund invests 40% in bonds and 60% goes to stocks.

Other balanced funds, like target funds and lifecycle funds, can be either more conservative or more aggressive in their asset allocation to the two primary investment options, stocks and bonds. If you really feel clueless, go with a balanced fund that fits your risk profile. The fund’s literature will describe how it ranks in terms of risk from high to low. Above all else, your best investment strategy is one that you feel comfortable with in terms of risk.