In economics, it is customary to distinguish four types of investment strategies:
Each investor needs to understand that for each of them there is a directly proportional relationship between actual risks and the level of profitability (profitability). In other words, the higher the risk on a particular investment, the corresponding investor is able to rely on a higher profit. And vice versa. The lower the risk level, the lower the profitability, and, therefore, the attractiveness of the investment in question.
Varieties of investment strategies
Now I propose to analyze in more detail each of the above-mentioned strategic types.
Conservative (passive) investment strategy implies the lowest profitability. In different sources, it refers to the level of profitability up to 15?20 percent per annum.
At the same time, in this case, the investor deals with the lowest possible level of investment risks. That is, such investments in practice practically do not threaten with the loss of invested capital.
Classic examples of conservative financial instruments include:
bank deposits (deposits);
investments in real estate;
purchase of gold or platinum;
shares in conservative mutual funds.
A moderate investment strategy implies a higher level of profitability. As a rule, we are talking about the 20?45 percent per annum.
As we already know, with an increase in the income from investments, the real level of risks also grows. That is, unlike conservative investments, moderate ones can no longer be considered safe.
Classical examples of moderate financial instruments should be considered:
securities placed by highly reliable companies;
investments in microfinance organizations;
more profitable units of mutual funds.
An aggressive investment strategy implies the highest profitability above 45-50 percent per annum. In practice, the yield can be higher than the voiced values by several orders of magnitude. Sometimes it reaches 100, 300 and even 1000% per annum.
Obviously, working with such super-aggressive financial instruments, the investor faces extreme risks. In some cases, their values tend to the absolute, that is, to 90 or even 100 percent.
We can consider as classic examples of aggressive financial instruments:
investments in PAMM accounts.
Any truly successful investor will tell you that it is impossible to consistently make a lot of money using any of the strategies mentioned above in its pure form. In everything you should look for and find a balance. Mixing in certain proportions, these types of investment strategies just help to find that golden mean.
A mixed investment strategy is the optimal combination of several types of financial instruments that differ in their profitability and riskiness.
As we now understand, the priority task of each investor is to form his own optimal investment strategy, which will be best combined with his unique psychological profile. Naturally, the finished recipe is not and can not be. Moreover, the search for the only correct answer may take years of continuous practice.
But what should a novice who does not yet have any serious theoretical knowledge and experience do? How can he build his first investment portfolio?
For such a case, there is a classic option for diversifying investments. In accordance with it, the investment portfolio must be formed from such financial instruments: