"In finance, an investment strategy is a set of rules, behaviors or procedures, designed to guide an investor's selection of an investment portfolio."
Investment principles include an understanding of risk and return, asset allocation, diversification, and various investment strategies such as value investing and growth investing.
Time Value of Money: This concept explains how the value of money changes over time due to factors such as inflation and interest rates.
Risk vs. Return: This topic explores the relationship between risk and return in investments, which suggests that higher-risk investments should yield higher returns.
Diversification: Diversification refers to the practice of spreading your investments across different asset classes, sectors, and regions to lower risk and increase returns.
Asset Allocation: Asset allocation involves dividing your investment portfolio among different types of assets such as stocks, bonds, and cash.
Portfolio Management: This topic involves managing your investment portfolio to ensure it aligns with your financial goals, risk tolerance, and investment horizon.
Fundamental Analysis: Fundamental analysis is a method of analyzing the intrinsic value of a company or security based on financial and economic factors.
Technical Analysis: This technique involves analyzing past price and volume data to evaluate future movements of a stock or market.
Market Cycles: Market cycles refer to the recurring patterns of ups and downs in the financial markets based on economic factors such as recessions and inflation.
Financial Planning: Financial planning involves creating a roadmap to achieve your financial goals and making investment decisions based on your personal circumstances.
Tax Planning: Tax planning involves minimizing your tax liability by making investment decisions that offer tax benefits such as tax-deductible retirement accounts.
Investment Vehicles: This topic covers the different investment options available to investors such as stocks, bonds, mutual funds, ETFs, and real estate.
Investment Strategies: Investment strategies involve determining your investment goals and selecting an approach such as value investing, growth investing, or income investing.
Behavioral Finance: Behavioral finance explores how psychological biases can influence investment decisions and how to overcome these biases.
Economic Indicators: Economic indicators such as GDP, inflation, and unemployment rates can provide insight into the health of the economy and help inform investment decisions.
Global Markets: Understanding global markets provides investors with the knowledge of how international events can impact their investments and how to diversify their portfolio globally.
Risk-Return Tradeoff: This principle states that higher the risk, greater the returns and vice versa. Investors must identify their risk tolerance and invest accordingly.
Diversification: It's a strategy of investing in multiple securities to lower portfolio risks. This principle allows investors to spread their money across different classes of assets.
Asset Allocation: This principle balances the investor's risk profile by mixing investments in different classes of assets such as cash, stocks, bonds, and real estate.
Time Value of Money: This principle assumes that the value of money today is worth more than the same amount of money in the future due to inflation and opportunity cost.
Compounding: The earlier investors start investing, the more time they get to compound their returns, helping them gain more significant returns over time.
Buy Low and Sell High: It's a standard, self-explanatory investment principle, implying investors must buy securities at low prices and sell them when they reach high prices.
Fundamental Analysis: This principle involves analyzing a company's financial statements, economic factors, and industry trends to evaluate its future performance.
Technical Analysis: This principle involves analyzing past trends and patterns of price movements of securities to predict future price movements.
Market Efficiency: This principle suggests that securities' prices instantly reflect all available information about the market.
Active vs. Passive Investing: This principle debates investing with a hands-on approach of selecting good investments vs. letting index funds or ETFs diversify and manage your portfolio.
Margin of Safety: It's a principle that investors use to gauge the degree of financial risk involved in investing in any security or asset.
Tax Efficiency: This principle focuses on minimizing the tax impact of investments and creating tax-advantaged investments based on individual circumstances.
"Individuals have different profit objectives, and their individual skills make different tactics and strategies appropriate."
"Some choices involve a tradeoff between risk and return."
"Most investors fall somewhere in between, accepting some risk for the expectation of higher returns."
"Investors frequently pick investments to hedge themselves against inflation."
"During periods of high inflation investments such as shares tend to perform less well in real terms."
"Investments such as shares should be invested into with the time frame of a minimum of 5 years in mind."
"It is recommended in finance a minimum of 6 months to 12 months expenses in a rainy-day current account, giving instant access before investing in riskier investments than an instant access account."
"It is also recommended no more than 90% of your money in non-instant access shares."
"Unexpected expenses can happen."
"If someone does not have an income an income can be created by using share income funds."