All newbie investors must follow a proven investment strategy. These strategies are meant to minimize the risk of the investors, while optimizing their potential returns. However, much like any other strategy, one should always remember that there is always the risk of losing money in the short run if one is putting their money in market-based securities like stocks and bonds. In the opinion of Kavan Choksi even the popular investment strategies take time to work, and hence it is vital to start the investment journey with realistic expectations.
Kavan Choksi discusses certain investment strategies that newbie investors can try out
As a person starts investing on their own, the world of investments can seem too wide. However, things can be simplified by exploring certain time-tested strategies. Here are a few investment strategies that can be well-suited for beginners:
- Buy and hold: This is a classic strategy that has proven itself over time. With a buy and hold strategy, one needs to do exactly what the name suggests. Basically, investors have to buy a stock and then hold it indefinitely. They should own the stock for at least 3 to 5 years before thinking about selling it off. The buy and hold strategy focuses on the long term, and helps investors to stay away from the risk of active trading. Under this strategy, the success of an investor would depend on how the underlying business performs.
- Buy index funds: This strategy is all about zeroing in on an attractive stock index and then purchasing an index fund on that basis. Instead of trying to beat the market, the investors should try to own the market through the fund and get its returns. Buying an index fund is a fairly simple approach and can yield amazing results with time. The return shall be weighted average of the index’s assets. With a diversified portfolio, the investor shall have much lower risk than owning just a few stocks. Moreover, they will also not have to evaluate individual stocks to invest in.
- Index and a few: Under this strategy, the index fund approach is used, and then the investor adds a few small positions to the portfolio. Index and a few strategy lower the risk and work involved with above discussed strategy, while improving the potential returns. The individual positions can significantly aid beginners to gain a good understanding of how to analyze and invest in stocks, without incurring any such high losses in case the investments do not work out.
- Income investing: This strategy involves owning investments that produce cash payouts, which are commonly dividend stocks and bonds. A part of the investment return comes in the form of hard cash, which can be used in any manner the investor wants. If one does own income stocks, they can still enjoy the benefits of capital gains in addition to the cash income.
As per Kavan Choksi, the popular investment strategies underlined above can help businesses to achieve their financial goals without dealing with high risks. Hence, they are ideal for investors new to the market.