When planning an investment strategy it is important that the strategy matches the needs and aspirations of the investor. A system that is successfully used for one person may not be suitable for another. There are various reasons for this, including ethical considerations and how much risk an investor is willing to take.
Investment should always be a long-term plan; when planning for retirement the most important consideration is to make funds last as long as possible while still providing a steady income.
Since the global economic crisis started in 2008, investment strategies have had to be radically changed. We live in a world where interest rates are at an all-time low and the stock markets are at the most volatile in decades. Gone are the days when it was possible to place a large portion of funds into cash and bonds and still receive a good return. Today, an investment portfolio with a large percentage of the investment in cash and bonds will be at risk from making no gains at all. In fact, too much cash and the investment will lose value over time as inflation outpaces interest rates.
One of the best ways to quickly gain an insight into the latest investment strategies is to analyze which stocks the successful investment fund managers are adding to their portfolios. Earlier this year the billionaire investment expert, Ken Fisher, provided a detailed summary of the current market situation and gave some insightful tips into how he is tackling the turbulent markets.
Ken Fisher has developed a reputation for picking stocks that beat the market trend. For two decades he has been choosing stocks that outperform the market - he is living proof that passive funds, that is those that simply track the stock markets, are not the best way to invest. .
Safe banking stocks
Ken Fisher has been buying banking stocks this year and increased his holding of the largely UK government owned Lloyds Banking Group (NYSE: LYG). This is considered a very safe bank to own at the moment because as it is now supported by the UK government failure is not an option. However, this is not just a low-risk bank, Lloyds Bank stock price has increased by almost 80 percent over the past year and some analysts believe that it may once again emerge from government ownership. Lloyds recently announced plans to cut around 10 percent of its workforce to further reduce its operating costs.
Ken Fisher’s second big move has been into transport, including the Iowa-based Heartland Express (NASDAQ: HTLD). The Internet has helped buyers reach more competitive suppliers in all markets and as a result all types of transportation have experienced staggering growth in recent years.
Most popular investment strategies
A good strategy is an investment roadmap that will ensure that an investor maintains a relatively objective and non-compulsive approach.
Top-down or bottom-up investing governs how stocks are picked. Top down investment strategy buys stocks based on a theme, such as sticking to one economic sector or in defensive investments such as healthcare and consumer staples.
Fundamental analysis is a strategy that involves deep analysis of all factors that impact on the performance of an investment. For example, an investor will analyze the management of a business to determine whether it is geared for success.
Contrarian investing is a slightly risky form of investment because it involves choosing stocks that are out of favor. The objective is to buy cheap and wait for the market to take interest. Investment managers learn to evaluate businesses and purchase shares in those that are undervalued.
Dividend investing is a form of investment that focuses on buying shares that pay out a healthy dividend. Capital gains are considered to be of lesser importance, the investor wants a regular income from their portfolio.
Any of these strategies can work when they are executed properly; the biggest challenge is in making the correct choices.
Where to get good advice
There are many places to seek advice. The first route should be to start reading the investment press - read blogs, newspaper financial pages, specialist investment news providers such as Bloomberg and Reuters. Also follow prominent investment managers who are on Twitter - they may often give tips.
The best advice is usually when it comes direct from an investment manager. Often the best tips are kept secret to all but an investment manager’s client so hiring the services of a top quality fund manager is a sure way to get some unparalleled investment advice.
All forms of investment carry an element of risk; holding cash is a risk in a low interest / high inflation market. Stock prices can go down as well as up, but so long as the strategy is carefully planned and risk understood, it is possible to make healthy gains on any investment.