Investors can invest strategically or tactically, depending on margin of profit expectations: high-yield, low-risk, or short-term investments.
Choice will ultimately be dictated by gain expected. It makes a big lot of difference to differentiate between tactical investment and strategic investment.
Risk, time, and yield are critical in strategic investment. The interplay of these factors leads to a perfectly tailored strategy.
Putting these three elements together, the investor has to determine the extent of risk he is willing to accommodate, the time frame he wishes to work with (long haul or short term), and yield outlook.
Risk
Every investment strategy comes with the risk of losing – or greatly diminishing – principal investment. Whether they are short-term or long-term, the level of risk you are willing to assume generally impacts the yield of the final investment.
Typically, high-risk opportunities offer a high return, while low-risk investments have lacklustre returns.
Time
Figuring out what sort of timeframe you’re working with will go a long way toward dictating which investment strategy is right for you.
If you start investing when you’re young, it is easy to choose investments which pay off steadily over the long term.
Investors who need to make money fast will typically assume much higher risks.
Yield
High yield strategies carry with them much higher than average risks, and vice versa. Obviously we would all like to make investments which pay off big, but in order to make a lot of money in the market we all have to assume some level of risk.
The safest investment strategies are the ones based on the lowest acceptable yield in order to fulfill your goals.
Investing tactically
Investment tactics are the plans and steps to meet investment goals.
If, for instance, you hope to save up money for retirement funds that need not be touched, the appropriate course of action is to subscribe to a retirement pension scheme, and perhaps take up an insurance policy at least 10 years or more ahead of retirement.
There are a whole range of investment tactics, and each is appropriate for a different strategy. To get appropriate results suitable for an individual investor, mixing and matching tactics is preferable.
However, investorguide.com has laid out below a few common investment tactics and advice which an investor may find helpful.
Fundamental analysis
If you love nothing better than combing through profit and loss statements, following the latest earnings forecasts, and learning everything you can about the management styles of each principal member of a company’s senior management employee, fundamental analysis might be a very solid tactic to adopt.
It tends to be most effective in the mid-term, either months or years down the line, as management has a chance to make internal changes which slowly begin to affect share prices.
Cyclical investing
Nearly everyone is aware that the market moves in yearly cycles. For instance, the price of crude oil tends to spike in the summer months, while home heating oil is most expensive in the winter due to simple supply and demand.
Identifying these trends and capitalising on them can yield high returns with little risk, although it will often take many months to put a plan like this into action.
Buy and hold
This tactics is also called “lazy investing”. The aim is to find stocks which have performed well in the past and are likely to continue to grow.
Buy and hold tactics are excellent for mid-term investors familiar with a handful of stocks who have a proven track record of performance. Once bought, the investment is held until the stock price reaches a set value where it is sold for a profit.
Growth investing
If you are an expert in a particular segment of the market, it is possible that you have good insights about which companies are poised to make big money in the future.
This high-risk, high-return strategy is often employed in short-term strategies in order to make big profits at the risk of big losses.
Tactics meet strategy
A combination of tactics and strategy may achieve a better result.
Some long-term investors prefer collective investment scheme, mutual funds, or even hedge funds, in order to let investment gurus with proven track records take risks on their behalf.
“Whatever your individual investment strategy is, and whichever tactics you prefer to use in order to reach your goals, the best advice that anyone can give you is to stay open-minded and fluid, making changes to your tactics as the situation warrants, and doing everything possible to keep your long-term strategy profitable,” experts at investorguide.com advised.
