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How do I Choose the Best Investment Trading Strategy?

Article Details
  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 31 July 2018
  • Copyright Protected:
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    Conjecture Corporation
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Deciding how you will conduct your investment trading activities is an ongoing process that is certain to change from time to time. Because your choice of investment strategy is impacted by many factors, including unanticipated shifts in the marketplace and your own evolving financial goals, there is the chance you will find one strategy very helpful at one point but somewhat inhibiting later on. Still, there are a few basic points to keep in mind as you determine the best investment trading strategy for your current situation.

One of the fundamental elements of choosing an investing strategy is to understand how you handle finances in general. Simply put, some people are very conservative with their money and prefer to built the investment portfolio with investments that are more of a sure thing. Others tend to be risk takers, willing to try something a little more volatile in the hopes of earning a greater return.

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Both approaches have their good points; neither approach is right for everyone. If you tend to play it safe, your investment trading strategy should include building your portfolio with reliable stocks, bonds, and other investments that are more or less sure to earn a smaller but consistent return. With that solid foundation established, you can occasionally step outside your comfort zone and try one or two investments that come with higher volatility. Since the impact on your portfolio would be minimal, any losses on the more volatile trades would be easier to deal with.

At the same time, even an investor who loves to take risks should include a few safe holdings in the portfolio. They help to provide some amount of consistency in an ever changing landscape. While the returns are not spectacular, they do help keep you out of the poorhouse when a wildcat investment does not pan out. For those safe investments, go with stocks issued by very stable companies, bonds that mature in a shorter period of time, and plans like a 401(k). With those in place to keep you grounded, you can have fun pursuing riskier ventures.

When developing your basic investment trading strategy, it is important to get professional advice. A financial adviser or broker can help you identify trading options that fit neatly into your basic mindset, help you balance the holdings in your portfolio and assist you in understanding the stock market and other financial markets with more clarity. This will make it possible to diversify your holdings so some are set aside as part of a retirement fund management strategy, while other holdings are aimed at generating returns that can be used for more immediate needs and wants. Building and employing a multi-layered investment trading strategy will provide you with both long term financial stability and resources to take chances in the here and now.

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