The best investment strategy is not the one that brings you the biggest historical return. It is the one that works best based on each individual investor’s objectives and risk tolerance. Thus, there is no absolute best investment strategy, since it works differently for different people.
You should never throw away your current investment strategy for some hot new investment strategy you just found online. Just stick to one time-tested basic.
You can experiment with the investment strategy later. But, you have to start by considering these top four investing strategies bellow.
Best 4 Investment Strategies
Fundamental Analysis
Fundamental analysis is the oldest and most basic investing style. It is usually used for researching and analyzing equities (mostly individual stocks). It is an active investing strategy.
Thus, it involves analyzing financial statements to get quality stocks. Investors have to compare the past and present data they get from the financial statements of a specific business and other businesses in the industry.
The data will direct them to a reasonable valuation of a specific company’s stock and find out whether that is a good purchase or not.
Technical Analysis
It is the opposite of fundamental analysis. In technical analysis, investors usually use charts to understand the price patterns and trends.
There are several patterns and trends that tell investors the signals, usually referred to as indicators, of the future market movement.
Usually, the patterns have names, like “head and shoulder” or “cup and handle.” Therefore, whenever these patterns start to appear, the investor will make up a decision based on the upcoming expected result of that pattern.
Remember, any fundamental data, like the P/E Ratio is not considered as technical analysis.
Growth Investing
It usually performs best during the mature stages of a market cycle. That is when the economy is growing at a healthy rate.
Growth strategy shows that all people involved in the economy, including corporations, consumers, and investors, are all doing good in healthy economies.
They gain increasingly higher expectations of future growth.
A good example of growth investing is the technology companies’ stock. They usually have a high value but still continue to grow beyond those valuations.
Buy and Hold
The strategy applies to buy investment securities and holding them for long periods of time. The investors believe that long-term returns can be reasonable despite the volatility characteristic of short-term periods.
This strategy is in opposition to absolute market timing, which typically has an investor buying and selling over shorter periods with the intention of buying at low prices and selling at high prices.
