Investment Strategies for the Modern Investor: The Ultimate Guide

Investment Strategies

Investment Strategies for Modern Investors: The modern investor is unafraid to challenge the status quo and buck conventional wisdom. They are willing to invest in alternative assets, actively manage their portfolio, and take calculated risks with their money. It sounds like the perfect profile for an emerging investor! Maybe not quite. A study by McKinsey & Company published in January 2018 revealed that millennials prefer to invest in technology over real estate or media as a long-term investment strategy. The ultimate goal for young professionals today is to retire comfortably without needing financial support from other family members. How can you achieve this? We’ve outlined different ways to start investing strategically so that your future self will thank you later.

Important Investment Strategies To Remember

Read on for a detailed look at your investment strategies as an emerging investor.

Growth Investing

A growth investing strategy focuses on accumulating cash by purchasing stocks with the potential to rise in value. It is most frequently seen in equities where investors think the company’s value, and subsequently, the value of the shares they’ve bought is expected to increase. There are numerous sub-strategies within growth investing. Long-term investments and short-term investments are two of the most prominent.

Purchasing stocks and holding them for less than a year is considered short-term investing. Short-term growth investments are used by investors when they believe a company’s value will increase swiftly. On the other hand, long-term investments are held for a minimum of two years. The shareholders use these when they believe the company’s valuation will increase gradually over time.

Build an Emergency Fund

Every modern investor knows that some investments have risk. But there will always be some unforeseen event that changes the course of your financial future. When the unexpected happens, you don’t want to be putting your long-term financial health in danger. Building an emergency fund is the best way to protect yourself against life’s unpredictable events. These events can include a sudden medical emergency, a natural disaster, or simply needing to cover some unexpected expenses such as car repairs.

An emergency fund is different from insurance because it’s money you have on hand that you can use without red tape. Having a savings fund that is readily available but separate from your regular investment portfolio is important. It means you can take care of unexpected expenses without dipping into your long-term investments.

Invest Regularly in a Tax-Free Savings Account

Tax-free savings accounts (TFSAs) have become increasingly popular with investors in recent years. This is a great way to save money regularly, not just old amounts. You want to ensure you are maximizing your investment by maximizing the tax benefit of the TFSA. Tax-free savings accounts give you an added incentive to save.

Contributions to a TFSA account are not deductible for federal income tax purposes. Still, any earnings within the account are tax-free, and the funds can be withdrawn at any time without penalty. If you’re looking to invest regularly and pay tax efficiently, a TFSA account is your best bet.

Diversification Through Asset Classes

Diversification is the bedrock of any successful investment portfolio. This is achieved by spreading your money across different sectors of the economy and making different types of investments within each sector. Diversification can reduce risk by spreading your money across many different types of investments. You can have a basket of stocks from different industries, bonds from different governments, and real estate or commodities in different regions.

The goal is to have your eggs in multiple baskets so that if one or two investments do poorly, the rest can help make the difference. If you put all your money into one investment, that investment is more likely to be adversely affected by a specific event or situation. Diversification is beneficial because it reduces your overall risk. There is no way to eliminate risk when investing completely, but you can lower your risk by adding different investments to your portfolio.

Exchange Traded Funds (ETFs)

Exchange Traded Funds (ETFs) are low-cost, diversified, and transparent investment vehicles. Professional investment managers manage ETFs to track stocks, bonds, or commodities baskets. They are bought and sold like stocks on a stock exchange throughout the day, which helps to keep the cost of investing low. ETFs come in many different categories and can be traded like stocks, which means you can buy and sell them anytime during the trading day.

ETFs allow you to diversify your portfolio by investing in everything from technology to financial services to agriculture. They are a great way to invest in sectors of the economy you might not have had the chance to invest in. Furthermore, they are highly transparent and low-cost investment vehicles that allow you to diversify your portfolio efficiently.

Hedge Fund Investment Strategies

Hedge funds are a type of private investment fund that charges high fees and is only available to high-net-worth individuals. Institutions and wealthy families often use them to diversify their investment portfolios and get exposure to assets that are difficult for the average investor to access.

With the rise of the modern investor, hedge funds have become a more viable investment strategy. Many hedge funds have lowered their entry points to accept smaller investment amounts from individuals or have opened their doors to a wider audience by launching a public fund offering.

While hedge funds are not for everyone, they are an advanced investment strategy that can diversify your portfolio and deliver strong returns, especially in down markets when other asset classes are struggling.

Conclusion

The modern investor is unafraid to challenge the status quo and buck conventional wisdom. They are willing to invest in alternative assets, actively manage their portfolio, and take calculated risks with their money. This profile describes a person willing to invest in new and untested strategies and take calculated risks with their money. If you like computers, algorithms, and trading, then perhaps hedge funds are right.

If you prefer real estate, commodities, and ownership of companies, then mutual funds are more your style. Whatever your investment strategy, remember to start today so that your future self will thank you later.

Investments are risky, so if you’re looking for planning, strategy, and advice, contact All Seasons Wealth today and speak to a qualified and experienced financial expert who will help you achieve your life goals. Call (813) 490-6610 or visit our website.

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