If you ask five investors what the perfect investment strategy is, you will get five different answers. However, these five investors are likely closer to each other than they would like to admit. There are concepts that relate to all of these investors. Putting these concepts together will give you the strategy that you are looking for.
Strategize Through Diversification:
There is no single investment that is going to save your life. You need to have a diverse portfolio of investments if you are looking to profit in all markets. The market will go up, down, sideways and many more complex formations. Diversify in order to make sure that you are okay in all markets.
Stick to Your Strengths:
Although you need to have a diverse portfolio, you do not need to spread the diversity outside of your core competencies. The greatest investors in the world have diversified portfolios, but they may not look diversified to the naked eye. For instance, Warren Buffett does not invest in technology. This is true even though the tech industry has experienced a great deal of profitability in the past few years. Why does Warren Buffett stay out of the tech industry? He does not understand it. If he does not understand it, then he does not add it to his diverse portfolio.
Do Not Follow the Crowd:
The old Warren Buffett strategy still works – you buy when everyone else is selling, and you sell when everyone else is buying. In the short-term, the market is based on a great deal of emotion. However, the long-term tends to balance this emotion out. The fundamentals of investments become much more important as time moves on. You can capitalize on the short-term emotion to get more assets in the long term so that you can profit without spending a great deal of money.
Have a Plan to Get Out When You Get In:
You make your money when you buy investments, not when you sell them. How? You have a plan to get out before you ever get in. This is a very important investment strategy that everyone should pay attention to. If you do not know how much profit that you want to take from a particular investment, then you need to sit down with a paper and pencil until you do. Work out exactly what will be the prophet at which you get out of the business. By the same token, you should also sit down and calculate how much of a loss you are willing to take before you get out.
The strategies above will ensure that you have the best investment portfolio for any market. You cannot determine the movements of the market, but you can’t protect yourself against them. Profits take care of themselves. All that you need to do is follow the tips above and keep your eye on the market so that you can take advantage of anything that you see happening within your core competencies.
Yorkville Advisors, LLC is a privately owned hedge fund sponsor.