Choosing a good investment strategy is very important when you invest. In this article we look at a few things that you have to take into account when selecting an investment strategy. We will also discuss the various investment strategies that you can apply.
Investment strategy in the short term
In the short term, you will have to use a different investment strategy than in the long term. In the short term, it is wise to use a CFD investment strategy. CFDs are contracts on securities and make it possible to also benefit from price fluctuations in the (very) short term. When determining a short-term strategy, the following is important in any case:
- When will you get in the market and why? Make a clear analysis.
- Use a stop loss to limit your losses.
- Use orders to automate purchases.
In the short term, the focus of an investment strategy is much different; you are usually looking for a quick profit. The fundamental aspects or the underlying figures are then much less important. With this form of investing, the emphasis is often on those things that apply in the short term, for example news speculation or analyzing patterns on a graph.
Investment strategy in the long term
If you plan to buy physical stocks, a long-term strategy is more likely to apply. Consider the investment strategy of Warren Buffet: buying undervalued stocks to hold them for a longer period of time. Only once the stocks have increased enough in value do you sell them again.
Even if you invest in the long term, there are all sorts of strategies you could use. Consider, for example, the way in which you select stocks or the way in which you divide your money between stocks and less risky bonds.
How do you determine the best investment strategy?
The best investment strategy often depends on your personality. People who like to avoid risks might be better off with physical investments in the long term. If you do not mind high risks, you can invest in more risky investment products such as CFDs.
So think for yourself how much risk you want to run with your strategy. There is no unilateral strategy; a strategy is ultimately entirely personal. In order to find an appropriate strategy, it is important to have a clear picture of your own risk profile.
Compose your own strategy
When you know how much risk you want to take, you can put together your own strategy. This can be done by establishing certain rules. Set rules for yourself regarding when you will buy or sell certain stocks and then stick to those rules.
It is important to practice and experiment a lot. That way you can perfect your strategy before you start investing with real money. Thus, open your own demo account with a broker first!