Investing can be a great way to secure or bolster your long-term financial future. Depending on what you want from your investment strategy, it’s possible to tailor it so it’s more or less risk-averse. This will usually be determined by an investor’s overarching goals i.e. whether they want to prioritize profit or security.
While buying low and selling high is the most obvious way to accumulate wealth, it’s a lot easier said than done – and it can be incredibly high risk. A more realistic approach to success is to strategically deploy your capital and ensure that it works in multiple ways to deliver a profit.
What you want, above all, is to create a balanced and carefully thought-out investment portfolio. Here are three invaluable tips to help you do that.
1. Opportunity knocks aka price action strategies
As we mentioned earlier, the most effective way to profit in the financial markets is to purchase assets that are going to rise in value. However, this is a goal every trader shares, and identifying these golden eggs is not always easy.
This doesn’t mean you should stop looking for opportunities; it means you ought to deploy one of two price action strategies to help you. The first is known as value investing. This is where you wait for stocks to go on sale, meaning they’re notably undervalued when you buy them. This tactic requires a great deal of patience and means keeping an ear to the ground, but it is effective.
The second tactic is momentum trading. This is when an investor buys stock whose price is already on the rise. It’s based on the principle that it’s likely to keep going up. However, it’s only really suitable for those with a shorter-term strategy who are willing and able to act quickly. This means buying and then rapidly selling when the stock’s value reaches its zenith.
2. Safe and sensible dividends
To balance these more opportunistic price action strategies, you should also invest in stocks that pay dividends. While these may seem boring and overly risk-averse, they do have two major advantages.
Firstly, they give you a stable income. Secondly, they lower your cost basis for the stock you purchase. This makes them an ideal counterweight for more volatile investments.
3. Either/or CFDs
Thirdly and finally, we suggest looking into contracts for difference (CFDs). As Skilling explains, these are an increasingly popular form of trading. They offer investors a unique opportunity: to speculate on price movement without purchasing the underlying asset. The interesting aspect of CFDs lies primarily in their versatility; because the trader doesn’t own the asset itself, they can profit from both rising and falling markets.
The leveraged trading that’s available also means significantly less capital is needed to make a trade so that CFDs represent both a useful and economical addition to an investor’s portfolio.
When it comes to improving your investment performance, there are many ways to do this. The three above are only a small selection, but represent strategies that almost all traders can benefit from. Consider incorporating them into your portfolio the next time you’re looking to improve it.