How to develop better investment strategy

Every investor has more assets than just cash. FILE PHOTO | NMG 

By NDIRANGU NGUNJIRI
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Summary

• Diversifying across asset classes may protect you against underperformance in any one asset class.

Before you invest, you should consider developing your personal investment strategy. Tactics without
this is the noise before defeat. This should be part of an overall asset strategy.

Your business investment strategy is your plan for deciding how and what to put your money in to meet long-term goals. The first thing is to ask yourself where you want to be five years later and what you're doing to make that happen.

It is no secret that behind every successful investment there is a written, measurable and repeatable strategy.

Before we get into the nitty-gritty of the different types of popular investment strategies for beginners; let’s find out what considerations will affect the strategy you choose.

EVALUATE YOUR ASSETS

Every investor has more assets than just cash. Figure out ways to complement those assets to reduce risks and achieve their goals. In evaluating your assets, you will want to consider the size of your portfolio, the type of monetary assets you have, and the best way or ways to deploy them. You’ll also want to evaluate your non-monetary assets in terms of expertise, knowledge gaps, network resources, the pace and style in which you want to learn and co-invest, and the kinds of partners you believe will make you most effective.

TIME FRAME

Consider what your investment time frame is. If you have a long-term investment timeframe, you may have more capacity to ride out any market downturns, and so could consider investments with higher risk or higher return profiles (such as shares). If your investment timeframe is short, you may need to be more cautious.

ASSET ALLOCATION

Diversifying across asset classes may protect you against underperformance in any one asset class. This will reflect how cautious or aggressive your investment strategy is. Determine how much of your portfolio you want in each of the asset classes (cash, bonds, property and shares). Rebalance portfolio throughout its life to ensure asset class weightings continue to be appropriate for you.