Financial Dictionary - Investment strategy
An investment strategy is something as simple as the “plan” we have in mind to get returns on our capital.
This plan needs to be based on two essential pillars: the method and discipline.
We talked in depth about how to create our own strategy in our Bankinter Broker Academy but we have summarised the basics here.
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First, to define our method, we must take into account different aspects such as the term you want to invest for, how much time you have to follow the stock market and monitor your portfolio, the economic knowledge you have, and of course, your level of risk aversion (conservative, moderate, aggressive, etc.).
Once these variables have been identified, we must select the product that suits us and that allows us, based on the risk that we are willing to assume, to obtain the profitability that we want.
There are no good or bad methods, or foolproof methods. The main thing is for each method to be adjusted to each investor. As we have said, we invest differently depending on the risk we want to take, our goals and interests, our knowledge and preferences, etc. And so, we decide the asset class to include in our portfolio.
Once we have defined our method, the second step involves applying it consistently: trading does not stop at any time, and preparation, knowledge, dedication and learning from mistakes are the ingredients to success. There is no point establishing a good method we are comfortable with, if we get carried away by emotions or the heat of the moment when it comes to actually carrying out the operation.
There are various strategies (method + discipline) that may be successful for the investor, and we should bear in mind that we need not overcomplicate things in order to invest successfully. There are very simple strategies that we can apply from our first operation, that help you trade properly, controlling risk, and improving our chances of success and long-term profitability.
Find out everything about these in our Bankinter Broker Academy, and improve your investment method from the very start.
Investment styles and investment strategies
As for investment styles, we can find hundreds of them by doing a simple internet search.
An investment style refers to a certain method of investing.
For example, the most well-known or most talked about are “Growth” and “Value”. While one method looks for companies that may have high potential for growth, the other looks for consolidated companies that may attractively priced given the long-term value they represent in our portfolio.