Monitoring and Rebalancing
Being an investment management process, it is not a one-time affair but needs to be supervised time and again and fine-tuned as per the existing goals and market trends.
-Track Your Portfolio Performance
-Review Goals and Adjust Accordingly
-Rebalance Your Portfolio
-Stay Informed About Market Trends
-Maintain a Long-Term Perspective
Key Strategies in Investment Management
The important factor that determines the prospects of an efficient investment management is the approaches, which you use to invest and grow your wealth with minimal potential for risks. Knowledge of the major approaches; the choices between active and passive management, value and growth, dollar-cost investment, and tax-sheltered planning will help you make sound decisions that will fit your plan. The attributes of each strategy provide specific advantages given perceived risk and time availability as well as product preferences.
Active vs Passive Investment Strategies
Investment strategies generally fall into two categories: active and passive. Each has its unique approach to generating returns, and choosing the right one depends on your investment style, goals, and resources.
Active Investment Strategy
An active investment strategy quite simply involves choosing all the actual stocks with the intent of beating the market. Such investors engage in market research and analysis and make frequent operations to buy or sell securities exploiting market anachronisms. Market beating styles of investment are very challenging and may demand constant market research. As such it is more appropriate for those who have time on their side, knowledge of the venture and are willing to take a higher risk.
Passive Investment Strategy
On the other hand, passive investment strategy seeks to mimic an index or benchmark such as S&P 500 index. In contrast to active investors, who try to beat the market, passive investors utilize what they receive in the market while investing for the long term. This strategy introduces benefits to those who prefer low interference in the portfolio, long-term focused goals, and lower risk-taking propensity.
Value vs Growth Investing
It is important to know the difference between value and growth investors so that an investor can develop a portfolio well-suited to him/her.
Value Investing
However the value investing approach of investing involves buying stock or an asset at a price below its book value. Some investors argue that most people have not valued these assets enough; this is a good chance for a correction to happen.
- Pros: Potential for significant returns as the stock’s true value is recognized by the market.
- Cons: The market can remain inefficient for extended periods, and there may be a delay in realizing returns.
Value investors always prefer companies with low P:E ratios, good dividends and sound financials. This strategy is less aggressive and it therefore preferred by conservative investors.
Growth Investing
Growth investing, on the other hand, involves investing in stocks or other securities that have prospects of above-average returns, even though they seem to be overpriced at the time. Growth investors look for those shares of stocks that are rapidly growing in the present and are likely to be in the future. Growth investing is similarly appropriate for those investors who can afford to take higher risk in the hope of investing in future success of such companies.