An investment strategy is a set of rules, procedures or behaviors, these are launched to guide an investor’s selection of an investment portfolio. Generally this strategy is designed according to the investor’s risk return trade off, some investors prefer to reduce the risk, some investors prefer to maximize the returns by investing in risky assets, but most select strategy somewhere in between.
Types of investment strategies:
Types of investment strategies can be defined as:
- A passive investment strategy make effort to reduce or minimize transaction costs.
- An active investment strategy suggest to maximize or increase returns depending on moves like proper market timing. This generally mean selling in the highs and buying in the lows or selling investment instruments when their price appreciates and buying them when they are cheap. But this strategy not very useful to small time investors.
Buy and hold strategy can be adopted by small time investors to invest in equities, which though changeable in nature gives favorable long term returns. For small time investors, investing in equity markets is associated with the investors holding on for very long periods. The holding period extends the lifespan of the mortgage in case of real estate.