Financial Goal
You're more likely to achieve a goal if you define it. Having a goal focuses your choices and decision-making capabilities.
Time Horizon
Knowing your "investment time horizon" or when you need to start withdrawing certain amounts from your savings, is key to determining which type of investments are the best match for your financial goals. Some investments may be too volatile for short periods; other types may not offer adequate long-term growth.
Risk Tolerance
Sensitivity to risk differs from one person to another: some fear losses; others fear missing the maximum return. However you react to the risk, you should be aware of your tolerance to it as it greatly influences what investments you choose.
Managing risk means more than just avoiding an investment loss. It also means outpacing inflation and being able to make gains. Risks arise from different factors – some are controllable while others are not – but risk can be managed. A well-constructed investment strategy can improve your ability to keep risk in check.
Investment Knowledge
Your knowledge about investing may be limited or even quite sophisticated. When defining your strategy, determine early on if you understand what you're investing in, or if you have the updated knowledge that would benefit from an Investment Advisor.
Financial Situation
Your personal finances may be robust or average. You may owe money or be owed money, receiving a regular income or just faced with special expenses. Your personal financial cycle is critical to forming an effective investment strategy.
Other Considerations
Some people’s beliefs and values are deeply important to their investment strategy. Whether you invest primarily for returns or to explicitly defined principles such as religion, environment protection, etc., these values will affect how and where you invest your money.
Portfolio Management
When you invest you acquire a vehicle that changes in value overtime. There are ways to influence, and control your investments performance through various portfolio management techniques. Here are some core concepts related to portfolio management that underline an effective investment strategy, regardless of your personal circumstances. To find out how to make the most of these and others investment concepts, contact us today.
Asset Allocation
Your investment portfolio is structured by investment type, duration, amount, etc.
Selecting the right allocation of assets and adjusting them to changing conditions can put you on the right path to meet your financial goals. It's also an important strategy for reducing risk.
How your investment portfolio is structured by investment type, duration, amount, etc. – is, as an authoritative investment industry source put it: "the primary determinant of returns." Selecting the right allocation of assets and adjusting them to changing conditions can put you on the right path to meet your financial goals. It's also an important strategy for reducing risk.
Diversification
Choosing a variety of investment vehicles with different performance characteristics to achieve a better overall return, is the essence of asset allocation. Diversification reduces fluctuations’ impact in the value of investments.
"Don't put all of your eggs in one basket”. Guidance on the practical implications of the role diversification plays in an investor's portfolio and offers no insight into how a diversified portfolio is actually created.
Whether the market is bullish or bearish, maintaining a diversified portfolio is essential to any long-term investment strategy. A diversification strategy can help you achieve more consistent returns overtime and reduce your overall investment risk.