Investment strategies — how to choose the best one for you?

An action plan that helps you achieve specific investment goals is not just a definition of investment strategies, but a real tool that leads to financial success.

Investing in various assets is exciting and provides a solid dose of adrenaline, but it also carries the risk of failure and financial losses. Nevertheless, choosing the right investment strategy will guide you through the dynamically changing financial markets—straight to success!

Do you already know what you are looking for? Quick profits, regular income, or perhaps capital protection? Familiarizing yourself with different approaches, such as long-term investing, diversification, or active strategies, will help you make the best choice. Define your investment goals and see which investment strategy is best for you.

Table of contents:

• What is an investment strategy and why is it worth having one?
• Types of investment strategies – an overview of the most popular approaches
• How to choose the right investment strategy for you?
• The importance of diversification in investment strategies
• Monitoring and optimization of the selected investment strategy
• The most common mistakes in choosing and applying investment strategies
• Is it worth using ready-made investment strategies?

What is an investment strategy and why is it worth having one?

Imagine you are going on a trip to a place you have never been before. You don't know how to get there, which route to take, etc. What do you do? You set up a navigation system that guides you to your destination, ensuring safety and minimizing the risk of getting lost. The same applies to investing and investment strategy – it helps you navigate volatile markets, identifying optimal solutions and determining how to manage your money to achieve specific financial goals.

In other words, an investment strategy is a specific action plan that allows you to tailor your investments to your individual needs and risk tolerance. It includes decisions regarding, among other things, risk level, diversification, and portfolio management. It helps you avoid making impulsive decisions, which increases your chances of long-term success while minimizing investment risk.

Why is it worth having an investment strategy?

• Increases the chances of financial success.
• Calms emotions.
• Tailors investments to individual needs.
• It helps with risk management.
• Provides structure and control.

Types of investment strategies – an overview of the most popular approaches

Investors have various types of strategies at their disposal, depending on the level of risk and management approach. Popular investment strategies include:

• growth strategy – involves investing in assets that have the potential for rapid growth in value. Although risky, it can provide higher returns;
• income strategy – focuses on generating a steady income, e.g., in the form of rental income from real estate or interest from bonds. This strategy is recommended for investors who value stability;
• value strategy – focuses on assets that remain undervalued, have an understated value, but at the same time show potential. It uses fundamental analysis and related asset valuation methods;
• passive investing – the goal is to invest in a broad market index or ETFs;
• active strategy – involves constant monitoring of the market and then making decisions in response to changes;
• trend following – based on market trends, i.e., the specific direction of asset price movements over a given period. In other words, it involves following the direction in which a given asset or market is moving. The goal is to maximize profits from current market movements;
• buy and hold strategy – focuses on purchasing assets and holding them for the long term. The goal is to profit from the long-term growth in the value of the investment;
• short-term trading – the rapid buying and selling of assets, even on the same day;
• diversification strategy – investing in various market assets, such as stocks, bonds, and commodities, in order to diversify the portfolio and minimize the risk associated with a single type of investment.

How to choose the right investment strategy for you?

Choosing an investment strategy is one of the best ways to achieve your investment goals. Regardless of which investment strategy you choose, it will allow you to achieve more stable investment results.

Here's how to choose the right investment strategy for you.

1. Define your investment goals – think about what exactly you want to achieve: steady income, long-term capital growth, or protection against inflation.
2. Know your risk tolerance level – consider whether you are resilient to rapidly changing situations or prefer more stable and calm strategies.
3. Assess your resources – do you know how much capital you can invest and how much time you can devote to managing your investments? Think about this before making a decision.
4. Consider your time horizon – determine the length of time you want to invest. If these are long-term investments, think about growth strategies, and if you want to devote little time to them, then income strategies will work well.
5. Investment advisory services – consult an expert who will help you choose a strategy tailored to your needs and capabilities.

The importance of diversification in investment strategies

Diversification is a strategy that involves spreading investments across different assets or financial markets to minimize the risk of loss. So you can invest in stocks and bonds, cryptocurrencies, or commodities.

It is important because, in addition to reducing risk, it helps stabilize investment results. This means that unfavorable results from one investment can be offset by gains from others, leading to investment success. What do you gain from diversification? Here are the biggest benefits:

• risk reduction,
• capital protection against market volatility,
• portfolio stability
• better use of investment opportunities.

Because diversification allows you to invest in different sectors, domestic and foreign markets, you can take advantage of opportunities available in different parts of the world and industries.

Monitoring and optimization of the selected investment strategy

Monitoring and optimizing your investment strategy involves regularly reviewing your portfolio's performance and adjusting it to your changing goals, market conditions, and risk tolerance. It's also a crucial activity that:

• protects capital,
• helps identify excessively risky investments,
• allows you to react quickly to declines in value, making it easier to avoid major losses.

Technical analysis and fundamental analysis performed in this area help with optimization.

• Fundamental analysis allows you to assess the intrinsic value of assets, e.g., by examining financial results or industry trends. This way, you can decide whether it is worth keeping certain assets or investing in new ones.
• The use of technical analysis helps identify price trends and the right moments to enter or exit an investment.

The conclusions are that monitoring investments and using both analyses allows for effective portfolio management, minimizing risk and maximizing potential returns.

The most common mistakes in choosing and applying investment strategies

Investment risk has always existed, as have mistakes. They are part of the investment process and, in fact, do not only affect novice investors. By learning about them, you have a chance to avoid pitfalls and poor investment decisions that prevent you from growing your capital and, on the contrary, result in losses.

Among the most common mistakes are:

• unknown risk tolerance,
• overly emotional approach – making decisions under the influence of panic or euphoria,
• lack of clearly defined goals,
• lack of investment strategy,
• waiting for the right moment to start investing,
• failure to monitor the market,
• lack of diversification,
• insufficient experience and knowledge or a complete lack thereof,
• no contingency plan in case of crises,
• investing in gold, silver, or copper on suspicious websites.

Remember—even the best can't always avoid mistakes, but you can minimize them. Here are a few ways to do that.

1. Set your investment goal and strategy—stick to the plan.
2. Diversify your portfolio.
3. Determine your own risk tolerance and control your emotions.
4. Systematically expand your knowledge.
5. Analyze financial markets and monitor investments regularly.
6. If you are a beginner, opt for investment advisory services.

Is it worth using ready-made investment strategies?

An investment strategy is an action plan designed to help you achieve your financial goals. Sometimes, the decision-making process is not obvious. If you lack the necessary knowledge and experience, there is a greater risk of making ill-considered decisions and, consequently, losses. That is why ready-made investment strategies are a good solution. They have their advantages and disadvantages.

The advantages of ready-made strategies include:

1. Professional approach – thanks to the investment recommendation selected by the investment advisor, you can increase your chances of success.
2. Diversification – ready-made strategies often include different asset classes, which minimizes risk and also increases the chance of profit.
3. Ease of use – while the first rule in creating your own investment plan is to "define your investment goals," with ready-made solutions, you don't have to do anything yourself. This saves time and effort.
4. Monitoring and updating – strategies are systematically adjusted to changing market conditions.

When it comes to the disadvantages of ready-made strategies, we can mention:

1. Lack of personalization – ready-made solutions are not tailored to the individual goals and capabilities of the investor.
2. Limitations in choice – the offer may be limited to specific financial instruments, depending on which advisor or platform you choose.
3. Lack of flexibility – ready-made plans often cannot be changed at one's discretion.
4. Costs – using ready-made strategies may involve additional fees.

In summary, ready-made investment strategies are essentially ready-made portfolios with a specific level of risk and potential rate of return. They are constructed and managed by experts who manage investment funds.

They can be convenient and effective – it all depends on the investor's needs, knowledge, and experience. They are certainly very helpful for people who are just taking their first steps in the financial markets, don't have time to build a portfolio on their own, or are simply looking for an easier way to start investing.

When deciding on one, it is worth analyzing whether a given strategy actually meets your individual expectations or not. You can also find a platform offering various packages to choose from and select the strategy that suits you best.

This information is of a general nature only and should not be treated as investment advice within the meaning of applicable law. Investing in precious metals, among other things, may involve risk. Before making any investment decisions, it is recommended that you consult a financial advisor for an individual assessment of your investment options.