Which Investment Strategy Is Best for You?

Investors have been perennially fascinated with the potential of equities market in terms of growth and performance. However, short-term market volatility and unpredictable price movements of stocks have time and again proved this fascination to be a fickle thing at its best. That is, if the investor does not follow a predefined strategy and tries to evolve his approach as he gets exposure to the market.

Depending on personal risk appetite and preferences, an individual might adopt a defensive or aggressive investment strategy and work towards achieving his or her financial goals. Developing an investment portfolio is the key to managing your investments in an intelligent manner. Investing solely in equities would not be advisable, instead, one should invest proportionately in bonds, debentures and stocks and the proportion would depend largely on the risk tolerance and a host of other factors for stock market investors.

A defensive investor would always try to seek a balanced diversification of investment portfolio and devote a larger proportion of resources to fixed-income securities and debt instruments which are comparatively safe avenues and invest only a low proportion in high-risk equities. On the other hand, an aggressive investor would invest a greater proportion of his investments to high-risk equities and try to take advantage of every opportunity presented by the market to profit from his investments.

However, it is not advisable to go in for day trading for aggressive investors because it can drain the energy of an individual very quickly with comparatively little gains to make. Experts suggest that most of the well-known investors are those who have learnt to discipline their instincts and those who invest for the longer term for substantial gains to be had from the same. Most of the people, both defensive and aggressive investors, tend to sell when the market goes into a downturn spiral and start buying heavily when the market moves up.

This, in itself goes against the golden dictum of buy low, sell high. No matter what your risk appetite, if you wish to buy low, then you need to have guts to buy when the market is bearish and things are generally downturn because some of the good stocks would then be available for a bargain. To sell high you would need to wait for a bullish market and when your investments realize their expected value of returns, sell if you wish to profit. It is also important to understand that no matter if the market is moving up or going down, individual merit of a stock must never be overlooked before making a move. If an average investor makes dedicated effort to follow these basic principles, he or she could have had much better gains than would be possible otherwise.