Do You Have an Investing Strategy_1
Post on: 28 Апрель, 2015 No Comment
Preparation is important at any point in your investing career, but its especially crucial when youre just starting out. One of the first questions you should ask yourself is: do you have an investing strategy. If the answer is no, or if the answer is that youre not sure, its a good idea to design one. A sound investment strategy depends on your current financial position and what you hope to gain through your investments. For example, if youre investing because you want to buy a vacation home in two years, your strategy will be a little different than that of an investor who enters the market for longer term growth.
Investing Strategy
The most common investment strategies involve a top-down or a bottom-up approach. When youre looking at the overall market and making investment choices based on the strength of the economy and the expectations you have on a broad theme, youre investing top-down. You might buy a diverse mix of stocks in nearly every sector that you understand is doing well. Or, youll buy stock in targeted industries such as oil, technology or industrial metals. The bottom-up investment strategy is a little different but still comprehensive and easy for a new investor to adopt. With this type of strategy in place, youll buy and trade based on the strength of a specific company. The projections youre making about the market in general are less important because your strategy is focused not only on one industry, but on a single company.
Investing with a top-down strategy allows you to explore several different options in a constantly changing market. Plenty of tools and resources exist to help you make your decisions, and you can often feel pretty confident in what youre doing. When youre correct, your investments will pay large dividends and you can continue doing what works. When youre wrong, you wont necessarily lose too much because youll have the diversity of funds necessary to make adjustments.
Bottom-up investing is a little riskier because your money is so tightly wound up in one company. However, if the rest of the market or the economy as a whole is beginning to sink but your proactive research has found you an investment that is able to rise above the negativity surrounding it, youll be in good financial shape.
The next time someone asks do you have an investing strategy make sure you are able to respond with a confident yes. Whether you choose a top-down approach or a bottom-up strategy, or something else entirely, youll be well-positioned to face the market and its fluctuations when youre prepared. You know youve found the right investment strategy when you understand your purpose and youre able to connect how it helps you achieve your goals.