Part 1 of 5: the investing choices
3 Popular plays & 2 high risk strategies
5 Money Making Investment Strategies
Low to High Risk
Classifying investment strategies into these five broad groups help new investors understand some of their many investment choices. Choosing from these investing strategies can set you on the path to financial security.
While there are numerous variations within each broad strategic group; no strategy offers the impossible: risk free investing.
Beginners to investing must understand and accept there are degrees of risk when investing. Risk free means sitting on cash deposits.
Parking money in a savings account or a Guaranteed Investment Certificate is without risk. That can keep cash safe but loses purchasing power to inflation. Inflation will always exceed interest returns on cash deposits.
Only scams promise risk free returns greater than inflation. Unfortunately they ultimately produce 0% return at a cost of 100%.
To simply keep up with inflation requires that you accept some risk. That risk can be managed and kept small but can never be eliminated.
You can make many reasonable investment choices at lower rather than higher risk. When you select lower risk, generally speaking, you are agreeing to accept a lower rate of return.
Reaching for greater returns requires accepting greater risk. That risk can be managed but no investing approach eliminates all risk.
Knowledge improves returns
Building your knowledge and understanding of markets and investing will help you understand risk and learn how to manage it. Think of learning about investing like learning any other skill. Driving, using power tools or cooking a fine dinner demands a certain amount of knowledge.
We use such skills and accept a certain degree of risk in each activity. That contributes to our enjoyment and improves our lives.
Knowing and using investing knowledge can also make your life better. Learning how to do it well produces returns considerably beyond inflation and opens doors to the possibility of much greater and more profitable returns.
As risk rises from low to high, successful execution demands that you have greater knowledge, spend more time and make more effort. Combinations of greater knowledge and effort can produce considerably higher returns.
Pick your way
The huge range of possibilities present investors with many choices.
You can pick low risk. By devoting a low to moderate amount of time and effort you can enjoy solid positive returns.
At minimal effort, even beginners can learn if their investments are producing reasonable returns.
As your knowledge grows you will be able to see and understand more opportunities. Some opportunities at reasonable risk make possible significantly greater returns.
With knowledge you can learn to recognise opportunities for greater returns. You can also learn ways to keep costs as low as possible. Most often the fastest way to higher returns are through lower costs.
Future blog discussions will give you ways to look for and find both opportunity for gains and lower costs.
Acquiring more knowledge and devoting more time and effort can very significantly outperform the results of index investing. However, no amount of knowledge or effort will change what the market does. The market itself is superior to all strategies.
To enjoy the greatest possible returns we must learn how to listen to the market. Once we know what the market says, we can confidently apply the most favorable approach to making profits.
The five broad strategies listed above will be covered in more detail in our next few discussions. The lowest risk strategies are easiest to learn and use. That makes them a good place to start building your financial security.
What strategy appeals to you? Make a comment, ask a question, we can talk about it.
Part 2 and Part 3
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