The Best Investment Strategies & How To Get Started

Key Takeaways


The right investment can be one of the best pathways to financial freedom. Whether they serve as a supplement to your regular income, additional savings for retirement, or a way to pay off debt — the best investment strategies can impact your financial health for the better.

That being said, there are so many ways to begin investing that it can seem overwhelming at first. From stocks and bonds to real estate, there are numerous options available. The following guide will cover a few beginner-friendly investment strategies and help you find the right fit for your personal situation and goals. Keep reading to learn more.

What Is An Investment Strategy

An investment strategy is a specific plan to earn income through alternative sources and is typically determined by assessing one’s future goals, risk tolerance, needs, and financial health. Investments require different levels of involvement and capital to maintain. According to a study done by Pew Research Center, more than half of Americans have some form of investment strategy.

The reason for investing varies from person to person. However, one thing is clear: investments are popularly thought of as a way to bolster one’s finances. The best investment strategies will build off your available capital and hopefully provide a form of financial security. Without getting into the specifics just yet, there are varying levels of risk, time periods, and even involvement associated with the different types of investment strategies.


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how to start investing

Determining Your Investment Strategy Goals

The best investment strategy goes beyond searching for the one that yields the highest profits. When deciding how you are going to invest your funds (and ultimately time) there are so many more factors to consider. I recommend aspiring investors look at their ideal turnaround time, preferred level of activity, and individual risk tolerance. These considerations will demand a look at your schedule, day to day life, age, and more. Read on to get a better idea of short vs long term, active vs passive, and even high vs low-risk investment types.

Short Term Investment Strategies

A short term investment strategy is generally one that provides results before the three-year mark. A few examples are wholesaling, high-interest savings accounts, short-term bonds, and cash management accounts. Investors typically gravitate towards short term projects if they are saving for an upcoming event (such as a wedding) or if they are interested in earning capital fast to invest in something else. The biggest factor to consider when looking at short term options is profitability. With a three year turnaround, many investments simply don’t have the time to generate the same results as longer investments.

Long Term Investment Strategies

Long term investment strategies are usually what comes to mind when thinking about investing. These include rental real estate, stocks, mutual funds, and gold or collectibles. Long term investments can generate returns over several years, or in some cases as long as an investor chooses to stay involved in the market. Long term investment strategies can be a great option as they often involve lower risk and higher returns when compared to other investments. That being said, investors will have to get used to their capital being locked up for long periods of time.

Active Investment Strategies

An active investment strategy is exactly what it sounds like: one where the investor is regularly involved. Arguably, the well known active investment strategy is flipping houses (thanks to popular TV shows on HGTV). Another form of active investing is when investors control their own stock portfolios, rather than working with a financial institution or advisor. Active investment strategies can be great for anyone who wants to be hands-on with their finances, whether that be through portfolio management or getting involved directly in real estate.

Passive Investment Strategies

Passive investment strategies allow investors to sit back while their assets generate profits. These options include REITs, rental properties (typically with a property management company), or index funds. While passive investment strategies do require the same amount of research to establish, they don’t require as much day-to-day involvement when compared to other investments. For this reason, many choose passive investment strategies as a way to supplement their regular income or save for retirement.

High-Risk Investment Strategies

Risk is quite the buzzword when evaluating different investment strategies, and it refers to the volatility of a given investment. Most people associate high risk with high reward or profits. In many cases, this can be true, but high-risk investment strategies are not for everyone. More often than not young investors, who would have time to financially recover if anything were to go wrong, will gravitate towards these strategies. A few examples of high-risk investment strategies include investing in startup companies or “playing” the stock market so to speak.

Low-Risk Investment Strategies

Low-risk investment strategies can make great first investments for people of all ages. The reason for this is more often than not, investors will see some sort of return without jeopardizing their initial investment or risking large financial losses. Low-risk investments include purchasing bonds, CDs, and savings accounts. Diversification is another aspect of low-risk investing — this means spreading out your capital across several investment types. Diversifying your portfolio in this way can help safeguard against losing all of your funds in the event one investment does not perform well.

The Basic Types Of Investments

There are a few types of investment strategies that have performed well historically, making them great gateways into the world of investing. These basic forms of investments are associated with varying levels of involvement risk, depending on how they are managed. If you are considering investing, review the following basic strategies before getting started:

  • Stocks: Stocks are essentially shares in a company that investors can buy, hold, and sell to earn profits. By purchasing stocks, investors are putting capital in a company they believe will perform well in time — thus growing their initial investment. Stocks can rise and fall in value, adding some level of risk to this strategy. Although this risk is often counteracted by long investing timelines, and some form of professional portfolio management.

  • Bonds: Purchasing bonds can be a good low-risk, long-term investment strategy for anyone interested in growing their capital. Bonds are typically secured by a company or the government depending on the type, and provide returns in the form of interest payments. While bonds are not known for high returns, they can be a great way to diversify your portfolio.

  • Mutual Funds: Mutual funds are accounts that put your capital into multiple investments, such as stocks and bonds. These funds are managed professionally and have a designated investment strategy within themselves. They can have higher minimum investments when compared to other options, however, they are thought to perform well.

investing strategies

The Best Investment Strategies For Beginners

There is a reason so many new investors gravitate towards the same strategies: balance. The best beginner-friendly investment strategies will promise a great balance between risk and potential profitability. Here are a few to kick off your research:

  • Buy-and-hold investments: Buy-and-hold investing refers to making an initial investment, and maintaining the asset until it appreciates. The simplest example of this is purchasing stocks and then selling them after the shares increase in value. Buy-and-hold is also a popular strategy in real estate, as properties tend to appreciate strongly over time. These investment types are great for beginners as they offer some protection against any short-term dips in the market.

  • Growth investments: Another popular strategy for beginners is to identify growth investments. This means looking for emerging companies and purchasing shares before the business takes off. One of the most popular examples of utilizing a growth investment strategy can be seen by looking at Apple shareholders.

  • Value investments: Value investing is essentially the bargain shopping equivalent in the financial world. This strategy involves identifying investments that are priced below value and expected to grow. This could mean looking for property in an up and coming neighborhood or perhaps purchasing stocks of a lesser-known company expected to take off.

How To Start Your Investing Strategy

The first step to start investing is to take stock of your current financial health. Look at where you spend and save your money, how much income you generate, and any existing investments you may not realize you have. Often a great place to get started is by opening a retirement account through your employer, particularly if they have matching options. Consider what is already available to you and make sure you are using those opportunities to the fullest. Then, look for extra money in your budget to get started with an investment strategy.

Summary

As you can see, there are investment strategies that cater to almost every level of risk, involvement, and timing. Finding the best strategy for you will come down to understanding your personal preferences and financial situation. The best thing I can recommend is to do your research — what works great for a friend may not work for you. There is a lot at play when it comes to investing, but with the right determination, you can find a strategy that bolsters your financial health and helps you achieve your goals.

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Real Estate Investing Strategies
Real Estate Investing Strategies
Real Estate Investing Strategies
Real Estate Investing Strategies
Real Estate Investing Strategies
Real Estate Investing Strategies