Strathclyde Associates Investment Guide: Investment Strategy

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Strathclyde Associates Investment Guide: Investment Strategy
A well-planned investment strategy is essential investors is associated with the investors holding
before having any investment decisions. A on for very long periods. In the case of real
business strategy is generally based upon long run estate, the holding period extends the lifespan of
period. Formation of business strategy largely the mortgage. Notably, in case of this strategy,
dependent upon the factors such as long-term indexing or buying a small proportion of all the
goals and risk on the investment. shares in market index or a mutual fund is a
As the return on investment is not always clear, purely passive variant of the above strategy.
so the investors prepare the strategy so as to The strategy of value investing, a classic
face the ongoing challenges in investment. A investment strategy propagated by Benjamin
balanced investment strategy is generally required Graham simply concentrates on the strategy that
in the process of investment, which possesses an investor buys shares of a company as if he
long time period and some risk tolerance. was buying off the whole company without
In the case, when a strategy is aggressive the paying any attention to the stock market
chance of attaining a higher goal is higher. An scenario or any exterior conditions such as the
efficient strategy can be obtained from portfolio political climate. At the end of the day, if he can
theory, which shows good estimates on risk and buy the stock at less than that its actual future
return. worth to the buyer, the person is said to have
Strathclyde Associates Investment Guide: discovered a "value investment."
Investment Strategy is usually considered to be Investment strategies can also denote the
more of a branch of finance than economics. It is investment strategies a national or federal
defined as set of rules, a definite behavior or government should follow to bring about economic
procedure guiding an investor to choose his growth in a country. This can only be achieved by
investment portfolio. For example, investing in domestic investment as well as significant FDI
mutual funds has recently emerged as a very (Foreign Direct Investment) flows to particular
favorable investment strategy. sectors of countries, especially the less developed
An investment strategy is centered on a ones of Asia and Africa.
risk-return tradeoff for a potential investor. High In case of India, infrastructural problems,
return investment instruments such as real estate excessive government intervention, rigid labor
and mutual funds usually have more risks laws and corruption are stifling the flow of FDI in
associated with it than low return-low risk the critical sectors. Less developed countries such
investment opportunities. Return on investment as those in the Asia- Pacific region and Africa can
can be calculated on past or current investment bring about much needed development in these
or on the estimated return on future investment. economies.
Symbolically, it can be expressed as: Vf/Vi -1 An investment strategy in mutual funds is
where Vf denotes final investment value and Vi is probably the best bet for a profitable investment.
the initial investment value. ("f" and "i" should be Mutual funds is defined as a pool of money
noted as subscripts) supplied by different investors and in turn used by
Strathclyde Associates Investment Guide: Return the mutual fund company to invest in various
on investment (ROI) is profitable when Vf assets such as stocks and bonds. However, a
Vi-1>0 and the investment is deemed to be detailed research has to be conducted for
unprofitable when the value of final investment is choosing the mutual fund companies and only
less than that of the initial investment. ROI is those should be considered which have a
calculated to be 1 or 100% when the value of the professional investment manger. This will ensure
final investment is twice the value of the initial that the funds get channeled towards the right
investment. investments. This also applies for investing in
Types of investment strategies can be defined as stock markets where a decision to invest should
follows: A passive investment strategy follow a through research about the past and
attempted to minimize transaction costs. current trends of the stock prices and their Net
An active investment strategy guide used to Asset Values (NAV). Analyses from market
maximize returns based on moves such as researchers about the predicted future trends
proper market timing. This usually mean, "buying in should also be considered otherwise gains from
the lows and selling in the highs" or buying capital appreciation; capital gain distribution (in case
investment instruments when they are cheap and of mutual funds) and dividends might not be
selling them off when their price appreciates. This realized.
strategy, however, is not very beneficial for small Lastly, investment strategies leading to green
time investors. investments or investments in renewable sources
Small time investors can adopt the buy and hold of energy will be the next big thing in the
investment strategy to invest in equities, which investment spectrum. From Economy Watch.
although volatile in nature, give favorable long run Economy, Investment & Finance Reports.
returns. Investing in equity markets for small time

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