How To Choose The Right Investment Strategy? Complete Planning Guide!

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Q: What’s the best way to build your wealth?

A: Choosing the right Investment strategies!

It's not everyone's cup of tea, though. Otherwise, nobody in Canada would be fighting to make ends meet with each paycheck.

Additionally, investment plans for people under 30 and over 60 are different.

What is the best investment strategy for you, then? Find out now!

How To Choose The Best Investment Strategy?

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Picking up the right investment strategy for you depends on the following:

• Where do you want to see yourself financially in the coming years?
• What are your current financial goals?
• What is your risk tolerance factor?

Finding these simple answers can assist you in selecting the optimal investment, which can then support you in reaching your financial milestones.

We have categorized the strategies into 4 groups to help you simplify things:

Let’s view the options in detail:

1.  Value Investment

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This type of investing is like buying your favorite item but at a sale price and then selling it later for a higher price.

• Value investors do thorough research on finding hidden gems, aka the stocks they believe are undervalued.
• It involves a complete financial and technical analysis to really find out the right stocks.
• Renowned value investors are Charlie Munger, Warren Buffett, Benjamin Graham, etc.

Why Is Value Investing The Right Strategy For You?

Are you looking for a strategy that can do wonders for your wealth? Value investing is the answer you need.

If you are someone who has detective skills to reveal the hidden value of something, you must utilize your skills in value investing.

Cons

• Long-Term: Value investing requires patience because it can take a very long time to produce the desired reward.
• Demanding: Although it sounds easy to find hidden gems, investing in the right undervalued company in the stock world can be difficult.

Because you don’t want to lose money and morale when just starting to build your investment portfolio.

2.  Growth Investment

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This type of investing is similar to going hunting for your first home. You look for above-average properties with a higher chance of skyrocketing.

• Growth investors look for stocks that are ideal for their capital appreciation.
• They invest their money into companies with an above-average growth rate and the potential to be the next thing in the market.
• Thomas Rowe Price Jr. is the father of growth investors who set the label for people who want to increase their money with the right investment.
• They look into previous (current) and future growth, share price performance, ROE, and company profit margin.

Why Is Growth Investing The Right Strategy For You?

Growth investors can make much money as the stocks they bought in an emerging company are now considered one of the tops of the market.

The underlying assumption is that as the business grows and prospers, better earnings or revenues would ultimately result in higher stock values.

Cons

• High-Risk Factor: It’s a bit risky investment; if the company’s growth factor isn't to your liking, your stock will also suffer.
• No Dividends: Growing companies need capital to expand and earn a profit, so they use the investments and don’t give dividends.

Pro-tip: It's important to remember that a growth investment will not pay off if it can't increase by 10% or 15% over the next five years.

Also, it may sound like a value investment, but both are quite different. Here watch a video to understand the difference:

3.  Momentum Investment

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Momentum investors are the stock surfers!

They hold the view that winners never lose and losers never recover. They search for stocks that are in an uptrend to purchase.

• The momentum trading works on EMH, and the investors believe the market has yet to see the profit growth of the company they’re investing in.
• Investors purchase rising securities and sell them when they appear to have reached their top.
• The objective is to manage volatility by looking for purchasing bargains during brief uptrends and then selling when the momentum of the stocks begins to wane.

Why Is Momentum Investing Right Strategy For You?

Momentum trading is for you if you are adept at seizing the proper moments and know when to let go of that specific thing to profit from a fresh uptrend.

Also, you have to be active in the world of stocks to really review and analyze the momentum profits.

Note: You must know when to enter a market, when to invest, when to take your profit, and when to withdraw investment.

Cons

• Requires Skills: Only a pro momentum investor can get the maximum of their money. So, it’s not an investment strategy for beginners.
• Active Involvement: Validation can occur extremely fast; without warning, a point of entry or departure might no longer be available, and the chance of profit may be missed quicker than you think.

Although momentum investing is not right for everyone, it can frequently produce significant results when done correctly.

Trading in this fashion involves considerable personality and discipline since trades must be stopped at the first indication of loss.

Moreover, you must move the money immediately into a trade showing strength.

4.  DCA Investment

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It can be an ideal strategy for the majority of novice or expert investors.

By automating purchases, the dollar-cost averaging method can make managing volatile markets simpler.

• It involves a regular investment approach despite the security investment plan.
• By using this tactic, the effort necessary to try and time the market to purchase at the best pricing is eliminated.
• It encourages regular investing on the part of investors.

Why Is DCA Right Investment Strategy For You?

Are you a novice investor and want to start building your investment portfolio without taking much risk? This is it! DCA is for you!

• It allows low investment for people who don’t have much capital to invest,
• It gives a chance to investors who can’t stand the pressure of making quick profit decisions,
• In fact, it’s perfect for beginner investors who want to understand how the investment works.

Cons

• Increased Tax Liability: Your estimated cost basis will drop during phases of falling prices, raising your potential tax liability.
• Demanding Cashflow: Although DCA allows small investments, one must have a stable cash flow to start the investment and take it to a high-profit level.

It's vital to remember that when an asset's price varies up and down, DCA is an effective way to purchase it over a certain period.

• Those using dollar-cost averaging end up purchasing fewer stocks if the price continues to rise.
• They might keep buying when they should stay away from the market if it keeps declining.

So, you must research your market and platform before going on with this strategy.

Bottom Line

The world of investment may appear large when you start out on your own.

You have no investment knowledge, and everything you see seems too much to handle. However, there are several tried-and-true tactics you may use to simplify things.

• In fact, a sound investing approach can produce positive returns over time,
• Free up your time to concentrate on other aspects of the process,
• Or even make it enjoyable for you that you want to learn more!
  

There are numerous strategies for profit investing. You might prefer some tactics over others. Of course, each has advantages and disadvantages of its own.

By focusing on more than one technique, you can get the knowledge and expertise necessary to maximize your returns. Didn’t get the memo?

Read the complete guide!