What Is Your Investment Strategy? How To Make One

As you get into investing, do you have an investment strategy? Do you even know what an investment strategy is or what yours should look like? If not, here's what you need to know about investment strategies for beginners.

What Is an Investment Strategy? 

You can't make a strategy without understanding what it entails. In investing, the strategy is your overall approach to investing, your goals, and the means to execute your plan. It's basically a set of guiding principles that you think will help you reach your goal. Investment strategies often start out vague and overarching, but they should later develop into more detailed plans as you learn more about your investing personality.

What Are Some Investment Strategy Elements?

What might your investment strategy include? First, you should consider how active you wish to be in buying, selling, and trading stocks or bonds. Will you be heavily involved on a daily basis? Or do you plan to let professionals do the work?

Two of the most common strategies are 'buy and hold' and active trading. The buy-and-hold strategy emphasizes patience and long-term planning and keeps emotions out of the equation. On the other hand, an active trading strategy seeks to take advantage of short-term price changes and the right timing to boost values quickly. 

Finally, modern investors often include nonfinancial concerns in their investment strategy. This may mean you avoid unethical or environmentally unfriendly companies or it could mean you want to prioritize small businesses. You might plan to invest in certain sectors or regions, or even to include nontraditional investments that reflect your values. 

Should Your Investment Strategy Change? 

Your initial strategy should reflect who you are as investor and the goals you currently have. Many new investors opt for a 'buy and hold' strategy when they know little about the process, but they may become more active as their confidence and skills grow. This is a normal trajectory, so don't feel like you must adhere to the way you invested as a beginner. 

In addition, your investment strategy is informed by the goals themselves. Consider your retirement accounts. Younger investors should generally be more aggressive and then taper off risk as they age. However, even the youngest investor may not want to be so aggressive with active trading that they risk their retirement. Instead, they may save this for other goals like vacation funds or a dedicated experimental account. 

Where Can You Start?

The best place to start planning your investment strategy is to meet with an experienced investment strategist. They will work with you to identify all the factors that should (and will) define your approach. Contact a proprietary investment strategist to learn more.