Planning for Retirement Part 2 – Investing Strategies

Choosing the investment strategy that is right for you is hard.

If you are a high risk investor with a long investment horizon, you may look to include small cap and growth stocks or funds investing in your portfolio.  You should be more suitable for value and income investing if you have a moderate risk tolerance and shorter investment horizon. You may need to focus solely on income investing if you have a low risk tolerance and short investment horizon. For those looking for companies that aim to do no harm, you can add socially responsible assets to your portfolio.

Dividend paying stocks, ‘exchange traded’ funds, mutual funds, and real estate investment trusts, bonds are known as fixed type income security.  it’s a great way to build wealth over time.  Income investing involves buying securities that generally pay out returns on a steady schedule. Of course whenever investing your money without an investment strategy is like a football team going into a game without a playbook.  Investment strategies significantly improve your chances of winning, even though they are not required.

The principle behind value investing is simple. Whenever you’ve found them, it often takes a long time for their price to rise. Therefore this buy and hold technique requires a patient investor but should the right call be made, handsome payoffs could’ve been earned. Finding stocks that are under priced takes lots of research on the fundamentals of the underlying companies.

Even if the share price appears expensive in regards to metrics similar to ‘price to earnings’ or price-to-book ratios, growth investors look for companies that exhibit signs of ‘above average’ growth, through revenues and gains.  Furthermore, a relatively riskier strategy, growth investing involves investing in smaller companies that have high potential for growth, blue chips and emerging markets.

Small Cap stocks are appealing to investors being that their ability to go unnoticed. Small cap investing must only be used by more experienced stock investors as they are more volatile and therefore difficult to trade. Small cap investing involves purchasing stock of small companies with smaller market capitalization, as the name suggests. Consequently, it will a brand new car, you’d better find out what style suits you best, before you look at the different models.

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