5 Types of Investment Strategy

December 10, 2020

The financial markets can be an overwhelming prospect to new investors. There are simply so many ways and places to invest money that it can be intimidating to know you are choosing the right one for you. For that reason, many seasoned pros implement different types of strategies to help them achieve consistent returns over a long period of time.

Here, we look at five types of investment strategy that could be a style you implement to your portfolio to see your money grow.

Thematic

Thematic investing is the notion that you identify key trends around the world. In identifying those trends, you can start to pick out companies that will be affected - both positively and negatively - to help achieve your goals. For example, the current emphasis on climate change and sustainable investments can help frame companies you target to buy.

Value

Value investing is the idea that you should buy stock or financial instruments when the price is low, and sell it when the price has increased. The reason that this strategy can be successful is that you are minimising your losses from the outset. Buying stock when they are at their lowest, means that you have diminished your original investment outlay.

Growth

Growth investing is identifying companies that you believe have the ability to grow and prosper - but have not yet had that growth reflected in their price. It is like beating the market and getting their first. Identifying growth companies can be hard however as it means you have to unearth information that other investors do not know or appreciate yet.

Buy and hold

Buying and holding is a long investment strategy. The premise is that over the long term, all investments should go up. Investors, therefore, buy stock or securities and hold on to them seeking above-average returns. While this method is supported by historical trends in many markets around the globe, not all investors will have the luxury of investing over such a long period of time.

Passive

Passive investing is also known as index investing. The idea behind it is that over a longer period of time, an index will achieve better growth than the investment decisions made by active portfolio management. As a result, investors put their cash into an index fund that mimics an index like the FTSE100. On years that the FTSE 100 does well, the investor does well and vice versa.

Investment Strategies - key takeaways

Without a doubt, there is a lot of money to be made in any one of these investment strategies. However, you need to choose the one that works best for you. That solution is one that you most likely understand fully, but also have the means to implement it correctly. Choosing the right platform to invest with is critical therefore to supporting your investment targets and minimising transaction costs.

Rachel Lee
Having worked at Morgan Stanley and BNYMellon for over 10 years in pensions and investments, Rachel now works as a full-time business and financial writer.

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