How To Choose The Right Investment For Your Goals

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Choosing the right investment & investing strategy can be very hard at times, and even harder when you specialize it to yourself and your goals. It takes a lot of time and effort forming your own unique strategy, and when you’re a beginner to investing this can be even more frustrating. That’s why I will go through how you can choose and form your own investment strategy that lines up with your financial goals 

Now, choosing your own route to investing depends much on what characteristics you have, what financial goals you have and how much risk you are willing to take. When considering an investment strategy, you would much rather go for the long-term outcome regardless of the strategy, this is because it has been proven over and over that long-term investing works the best for the average investor. And do yourself a favor and cut out the idea of day trading and short-term investing out of your head, because these strategies will only leave you in pain.

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They both involve speculation and predicting the market, which is almost impossible, yes you may get lucky once or twice but most likely you will end up losing money anyway. So, spare yourself the pain and focus more on long-term investing. 

 

But first, before you choose anything you need to make some financial goals for yourself if you don’t already have them written down. When you are done making your goals, write them down on a piece of paper. The reason for this is so that you can remember your goals and truly realize and work out what it takes to achieve them. 


Now, second you would need to again grab a piece of paper and write down what kind of characteristics and mentality you have. The reason for this is because the characteristics define much of what type of investor you are most fitting to be. This means that your characteristics show you how much risk you are willing to take, how you respond to different market movements and so on.


The power of this action is that you get to know yourself much better, which is essential for investing. An example on how bad it can play out for someone who does not know themselves good enough is if they are an enterprising investor and continually watch their investments and are affected by the ups and downs in the market and end up derailing from their goals because of the ups and downs, like selling when the investment takes a temporary downturn. 

–The Top 10 Stocks To Watch For Long-Term Investing

Third, you would have to assess and analyze your current situation, what situation you want to be in and how much risk you are willing to take to achieve the preferred situation. By this I mean that you need to take a full analysis of your living situation and find out what amount you can invest, what you can afford to lose and what your goals are.


An example could be Alex: Alex works as a chief financial officer, and he makes a lucrative 400.000$ a year, considering if Alex has no loans and his living situation is fully set and paid for by half his income, he will have 200.000$ to invest a year. This means that Alex can take on more risk with his investments if he desires and it aligns with his financial goals. Peter on the other hand, just graduated high school and works at Starbucks and makes 19.000$ a year. Considering Peter has no loans, and his living expenses are paid by 80% of his salary, he would be inclined to take a lot less risk considering he can’t afford to lose so much money as Alex. The best approach for Peter would be to take a much more passive approach to investing. You see the idea… 


Lastly, Choose the right asset allocation: Asset allocation is the process of dividing your investment portfolio among different asset classes such as stocks, bonds, and cash. Your asset allocation should be based on your investment goals, risk tolerance, and time horizon.


For example, if you have a long-term investment horizon and are comfortable with risk, you may prefer a higher allocation to stocks. And if you are on the other end and won’t take as much risk you should aim more for bonds and secure investments. It is also important to stay diversified across sectors, industries, businesses and even nationalities so you can minimize the potential losses to your portfolio. 


There are generally two main types of investing strategies when it comes to long-term investing, and that is the defensive investor and the enterprising/aggressive investor. 

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Short Explanation: Aggressive investors are individuals or entities that are willing to take on higher risks in pursuit of higher returns. They are typically focused on achieving capital gains and are willing to invest in assets with high volatility, such as stocks, commodities, and alternative investments.

Aggressive investors typically have a varied of short to longer investment horizon and are comfortable with the possibility/risk of short-term losses in exchange for the potential for greater returns. 


Defensive investors, on the other hand, prioritize protecting their capital and minimizing risk over generating high returns. They are more focused on preserving their wealth and ensuring a consistent income stream. As such, defensive investors tend to invest in lower-risk assets, such as bonds and cash equivalents, and may have a longer investment horizon, with the goal of greater long term returns, possibly by compound interest.


But either way, they are also more likely to diversify their portfolio to reduce risk. 

Overall, the main difference between aggressive and defensive investors lies in their risk tolerance and investment objectives. Aggressive investors are willing to take on greater risks in pursuit of higher returns, while defensive investors prioritize minimizing risk and protecting their capital. 

 

I hope by reaching the end of this article you have gotten a good amount of information on how you can choose your own investing strategy. The key lesson from this article is to know yourself before you know your investments. And don’t blindly choose your strategy and investments, rather do your research, due diligence and all the steps above before jumping into on strategy.  


Thank you for reading.