Investment Strategy

Every investor will tell you about their ‘strategy’, but each is essentially trying to capitalise on rising share prices or amass cash revenue.

They concentrate on growth, income or a combination of both.

Those who focus on growth are looking to see capital appreciation higher than inflation. With income, they are looking for stocks that pay high dividends.

Investors will gather as much info as they can to try to gain an edge and beat the market.

What do I need to think about before investing?

You should give serious consideration to what you hope to achieve, what type of returns, and how much risk you’re comfortable with. A timeframe and share analysis are also helpful…

Risk

The overarching rule for investments is that you should only invest what you can afford to lose.

Some investors are more risk-averse than others and will bet less, or go with a more secure growth path — but the general rule is the riskier the asset, the higher the potential return.

Even risk-loving investors know to ‘smooth out’ their portfolio. Diversify across or within asset classes to minimise risk. This can protect from a drop in one or a few assets but won’t protect you in a declining market.

And risk can vary between short- and long-term investments…

Timeframe

How long are you looking to invest? Some prefer short-term investments of only one to three years, while others prefer a longer term.

Short-term investors often look for opportunities with low risk and volatility, but don’t tend to get very high returns.

Long-game investors however, of seven-plus years, are often willing to accept more risk and tend to accrue higher gains. These investments may experience negative growth some years, but over the long-run are more profitable.

No matter your preference, if you are investing in stocks you should examine the company and its surroundings before buying.

Share analysis

There are two main ways to examine shares:

Fundamental and technical analysis.

Fundamental analysis looks at business outlook and financial indicators, while technical analysis looks past the single entity to study the market.

Both are important to a successful investor in such a risky arena.

Consider seeing a financial adviser

If you’re new to the game then it may be worth a visit.

Instead of impersonal advice, an adviser must consider your goals, needs, and personal circumstances when making recommendations.

And if you’re still curious…

Learn about important investment strategies that few others know about here —— investing insights that could introduce you to some of the most profitable investment opportunities in Australia…and around the world.

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Have you ever sold shares based on someone else’s analysis, only for the share price to soar? Or, bought into someone else’s pick, just before it tanks?

We’re Getting Back to Basics

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Everyone knows Warren Buffett likes to invest in monopolies. Companies with a ‘wide moat’ he euphemistically calls them. Which is just as well, as his favourite holding period is ‘forever’. You can’t have pesky things like competition getting in the way.

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One way to generate an extra lot of income beyond dividends is to write (sell) call options. By writing a call option, you are agreeing to hand over these shares at the option’s strike price, if the buyer exercises the option.
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