It should come as no surprise that to invest and get good returns, you’ll need to make detailed plans and strategize for it, just like you need to do for just about anything that is worth doing at all. With investments, we are talking about money being put to a specific use and purpose which is to provide you with a good return on investment (ROI). To achieve this, it is important that you don’t rush into it but get your investment strategy right from the very beginning – one that suits your investment and financial objectives.
Creating an investment strategy has to be done in a way that caters to your specific needs. Another person’s strategy would likely not work for you because you would probably have different financial goals like retirement plans, when you want to buy a house, or even just a regular income.
Before you go ahead with creating an investment strategy, you should know the considerations that will affect the strategy you make use of.
Before you pick an investment strategy
Before selecting the investment strategy to use, you need to consider your financial objectives and your current circumstances. By considering these, you are able to decide what the best strategy is for you.
- Do you prefer to do it all by yourself or do you want a financial planner to do the work?
- What is your timeline? Long-term investments or short-term investments?
- What is your risk appetite? Can you afford to take higher risks? Determine your risk tolerance and invest accordingly.
- What do you expect from investing? How realistic is your aim in terms of the financial returns you hope to get from investing? Determine the amount of money you will need to achieve your set investment goal and work towards it.
- What is your tax situation like? Will you be paying more or less tax in the future? Will you need to defer taxes from investments?
The Best Investment Strategies for Beginners
Here are some of the best ways for beginners to consider when creating an investment strategy.
1. Investment advice from Robo advisors
This costs less than the average financial planner and this is how it works: computer algorithms create a portfolio for you based on information you provide like your future objectives, your risk tolerance, and your financial status. With this information, it is able to create a tailor made strategy with asset allocation that is aligned with your overall objectives. The low cost that they offer makes it a good choice for those that lack the money at the moment to pay financial planners.
2. Diversification with Commission-Free Exchange-Traded Funds (ETFs)
An ETF is a mixture of investments that are traded on the stock market, usually a combination of bonds, stocks, commodities, and currencies or real estate. It provides diversity since all your eggs aren’t in one basket, making it safer than individual stocks. You will need the services of a stock broker that offers commission-free ETF to invest in them.
3. Peer-to-peer (P2P) lending
Simply use a lending platform to lend money to an individual or small business and collect interest in return. It’s that simple.
4. Invest in Real Estate
One of the many ways that beginners could use to invest in real estate includes investing in real estate investment trusts (REITs), which operate as a stock. They are usually long-term investments and may not be a good strategy if money is required quickly.
Many strategies exist for investing so it is important to take into consideration your overall objective. Once you determine the best strategy that works for you, stick with it and enjoy your well-deserved ROI.