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Top 4 Investment Strategies You Can Use in Financial Markets

 

There are many investment strategies you can follow when investing in the financial markets. Each of them can prove to be extremely successful and help increase the value of your portfolio. However, it is not always easy to choose the right investment strategy among many options. Reading the world's political and macroeconomic data well and keeping your fingers on the pulse of the markets will be at least as important as the trading instruments and strategies you choose. Within the context of the specific circumstances of the period, some financial investments may shine, and some investment strategies may stand out positively from others.

There are many investment strategies you can follow when investing in the financial markets. Each of them can prove to be extremely successful and help increase the value of your portfolio

Let's start with the question of the best investment strategy. We must admit that there is no definitive answer to this question. The best does not even mean the most profitable investment strategy. This is because the amount of your capital and the risks you want to take or avoid are completely unique to you. Therefore, when searching for the answer to the question of the best investment strategy, it is wiser to pursue the one that is best for you. It is like buying clothes, there is no guarantee that either the most expensive or the most popular one will suit you. What is important is that you buy one that looks stylish on you, that you are comfortable with and that you can use for a long time.

It has been observed that long-term thinking leads to more positive results when choosing an investment strategy. For example, if you are actively working and making money, you can be somewhat aggressive and invest in stocks of companies that operate in sectors where you see growth potential. Towards your retirement, you can choose to be a more conservative investor and give government bonds, gold or silver a larger place in your portfolio.

We have tried to explain some of the proven investment strategies that you can use when building your portfolio. Enjoy reading.

 

Growth Investing

 

Growth investing is one of the oldest and most fundamental strategies. It involves analysing the financial statements and other factors related to the company behind the stocks, using fundamental analysis. The primary purpose here is not to receive dividends (profit sharing), but to invest in the stocks of companies with growth potential in the coming years. Investors using this strategy pay less attention to the current price of the stock and focus on potential future returns, thinking, "If the company achieves the targeted growth figures, its shares will increase in value".

Growth investors are as sensitive to the future of the industry as they are to the company. This is because their income depends on the growth and development of the industry. For this reason, they focus on business areas in which new technologies and services come to the fore.

A growth-oriented investment strategy generally performs better in the mature phases of a market cycle. Investing in such stocks can bring high returns in the long run, especially if the country's economy appears healthy and the gross national product is increasing year by year. This is because we can say that in growing and developing economies, the demand for products and services from technology developing companies will increase with greater momentum. As a natural consequence, these companies will have an above-average growth performance.

Even if current share prices are relatively high, it can be extremely profitable to pursue a growth investment strategy and invest in the shares of such companies when conditions are favorable.

 

Active Trading

 

An active trading strategy is about making a profit from the price movements of a stock or financial asset. It is difficult to pursue an active investment strategy; few people who try succeed. Even fewer achieve a high rate of return. In an active investment strategy, buying and selling can be done in any time frame consisting of months, days, minutes and even seconds. This being so, it is a relatively short-term strategy. It is riskier than other investment strategies, but it is preferred by a significant part of investors who trade in the financial markets, because it offers the possibility of achieving high returns in the short term.

While fundamental analysis is more important for investors pursuing a growth strategy, technical analysis tends to be the main point of reference of most investors pursuing an active investment strategy. Active traders follow the daily news feeds in the markets, study trends and analyse charts. In this way, they try to make the best trading decisions.

The time commitment of an active investment strategy is also high. Market monitoring and technical analysis can take up a significant portion of the day, especially for investors who engage in leveraged trading.

Not every investor who follows an active investment strategy is committed to day trading. A slower version of active investing, known as momentum investing strategy, may also be preferred. According to this strategy, when there is momentum (acceleration) in the markets, investments can be made even when prices are high and profits can be made by selling when prices are higher. In simpler terms, the momentum strategy can be defined as buying at high prices and selling at higher prices.

 

Value Investment Strategy

 

Value investing is a strategy of researching and finding stocks that are believed to be trading at a price much below their true value and investing in them. It is not so easy to make a profit after investing in such stocks. Because the stock needs to make a significant investment to go back up. Identifying these stocks requires serious research.

Value investors invest in stocks that have overreacted to bad news in the market, have lost too much of their value not matching the company's financial profile and strong long-term prospects, and they take profits by selling on potential price appreciation.

If you follow a value investment strategy, you do your research using fundamental and technical analysis methods instead of trading with herd psychology, and you find gold covered in mud. Because gold does not lose its value by falling into the mud.

 

 

Buy and Hold Strategy

 

Buy and Hold is a concept that crypto investors are particularly familiar with. It is a strategy that aims to invest in the right product and generate high profits in the long run. According to this strategy, the long-term returns of the markets come from short-term price movements. Investors who want to follow this strategy should make investment decisions after thorough research, just like with growth-based investments.

Buy and hold is inherently a passive investment strategy. Portfolios created according to this strategy are called lazy portfolios. If the buy-and-hold strategy is followed in the stock markets, a successful lazy portfolio can be created and a high return achieved in the long term.

Stock investors who constantly buy and sell on the stock market pay a commission fee for each transaction to the brokerage house they work with. Although it may seem like a small amount, these commission fees can pile into figures that can significantly reduce the profitability of investors who have been trading in the markets for many years. The buy-and-hold strategy does not require a large number of transactions, which keeps the commission fees in the traders' pockets.

 

Why is it important to follow a strategy when investing?

 

People have always been interested in investing in various financial instruments. Because they want to make profits or at least hedge their capital against inflation. Although investing in financial markets is often not a requirement, we can say that trading without a strategy is no different from gambling. The investor should determine the most suitable investment strategy according to his own capital, the risk he wants to take, the time he wants to spare, the timeframe within which he expects to win.