If you’ve put off investing for quite some time because you’re just not sure where to begin, you’re not alone. In fact, most Americans — especially millennials — admit that investing is “scary” and “intimidating,” according to research by Ally Invest. The “Someday Scaries” plague about 61 percent of adults who know that, someday, they’ll need to be more financially secure — they just don’t quite know how exactly to get there.
But, while top-performing tools and coveted resources were once reserved for the Wall Street elite, AI and Big Data are reimagining the industry for everyday retailer investors. No matter where you are in your investing journey — even if you’re a total newbie — you, too, can save the big bucks for your financial future. You just need an investment strategy that’s right for you.
With that said, here are four investment strategies to consider when you’re just starting out.
Value investors look for the most bang for their buck; they’re the bargain hunters of investors. They look for stocks trading at lower costs that they believe really should be much higher. When the market finally realizes the value in those stocks and ups the price, value investors will make a profit on every share they’d purchased since they called it first. Warren Buffet is a famous value investor who was able to sell stocks for much higher than he’d paid when the market corrected undervaluation.
The downsides of value investing, however, is that it tends to be incredibly subjective — you decide whether the market is right or wrong about a stock — and it takes a lot of time to form those opinions. To be successful in value investing, you need to be well-researched in both companies and the larger markets.
Growth investing is the practice of investing in assets that you believe have serious potential for increasing in price. It’s, therefore, common to find growth stocks in emerging industries like the technology and medical sectors. Growth stocks typically break down into two categories.
- Short-Term Investments: These are held for less than a year. This is because investors believe a company will see rapid gains followed by a plateau.
- Long-Term Investments: These are held for more than a year. This is because investors believe the company will increase steadily for years or even decades.
For growth investing to work in your favor, however, you need to have a good grasp on the current health of the stocks in which you want to invest, compared to others. You also need to understand the company’s historical performance and future potential within its industry. The downside of growth investing is that most companies that are aggressively growing don’t typically pay out dividends. That’s a risky bet with no return in the interim.
Momentum investing refers to seeking out data-driven patterns and discrepancies in a company’s finances. Momentum investors look to capitalize on equities that are either over or undervalued. They believe that growing stocks will continue to grow, and stocks that consistently show loss will continue to lose.
That said, very few momentum funds prove excessively profitable. Buying and selling as a momentum investor comes with high trading costs since, for every stock traded, a broker or investment firm makes a commission on it. If you’re a beginner investor with a lot of time and a lot of money to invest, this could be a strategy for you.
Income investing focuses on buying securities that provide steady sources of revenue instead of putting money into equities that theoretically could increase in value. This strategy increases the cash-in value of your portfolio since income investing looks toward investments that provide immediate returns. Income investing can be divided into two broad categories:
- Dividend Investing: This is when a company regularly pays investors a portion of its profits (dividends).
- Bond Investing: Bonds are essentially loans you grant to institutions or governments in return for guaranteed interest and principal repayment. They pay out consistently.
The major shortcoming of income investing is that, with all strategies, there’s no guarantee that it’ll produce returns greater than or at least equal to your initial investments.
Deciphering the best investment strategy can be difficult, of course. You need a good grasp on your risk tolerance, an idea of your investment goals, an understanding of your investment timeline, and a commitment to keeping abreast of market swings.
Q.ai Invest can sort all of that for you, and then some. Our AI identifies and builds the most ideal portfolio for you based on key factors like your threshold for market volatility, your personal reasons for investing, and the time on your hands — and then it auto-adjusts your portfolio with inevitable market swings. Basically, you don’t have to lift a finger.