When you hear about investing, you can hear everything from “buy this stock now” to “set it and forget it” to “wait until it drops”.

These are all investment strategies.

Hearing all of these conflicting messages can be overwhelming and make investing feel like more of a chore than a method to build wealth.

Today, we aim to develop a winning investment strategy that fits your desired time commitment, return expectations, and risk tolerance.

See below for the sneak preview.

The Importance of a Strategy

Maybe you see investing as something you do when you feel like it, or you’ve become overwhelmed by all of the above conflicting strategies.

Regardless of your reasons, investing without a strategy will generate inconsistent, unpredictable results.

This is a massive problem because you lose the ability to estimate your financial future.

Say you know you’ll earn 10% on your investments annually. You can accurately predict your wealth far into the future and prepare for financial milestones like a car, house, or retirement.

If you have no idea what returns you’ll generate, you have no hope of predicting when you’ll be prepared to afford the same financial milestones.

Having an investment strategy allows you to plan for your financial future more confidently.

Common Investment Strategies

This is by no means a comprehensive list of investment strategies.

Instead, it’s meant to be a quick overview of popular options.

• Day Trading: Make quick trading decisions based on short-term movements of stocks with the goal of quick returns.

• Individual Long-Term Picking: Manually picking individual stocks, similar to day trading, but with no intent of selling quickly (>5 years).

• Passive Investing: Invest in the same ETFs (exchange-traded funds) or large individual stocks regularly with no thought of selling (>10 years).

• Dividend Investing: Pick individual stocks that pay higher dividends to earn more income along with growth.

How to Pick Your Investment Strategy

Let’s consider a few parameters to help you pick which fits you best.

• Time Commitment: Of the above, day trading will require by far the most time commitment, and passive investing will require by far the least (~0), with the other strategies in between.

• Return Expectations: Day trading is your only option if you expect to make money quickly. If you can stand to wait longer but have more predictable returns, passive and individual long-term are the best. If you want a lot of monthly income along the way, dividends are your best bet.

• Risk Tolerance: To minimize risk, use any option other than day trading. 

The Best Strategy for Most People

Even though personal finance is personal, when it comes to investing, there is one method that fits the vast majority of investors the best:

Passive Investing

There are a few reasons for this.

The first and most powerful reason (in my opinion) is that 90% of professional active traders fail to beat the overall market.

This reason alone makes it a no-brainer to invest passively and beat investors putting in far more effort.

The second reason is most people don’t want to commit very much time to investing.

Even if you like learning to trade stocks actively, the reality is far more tedious, from reading financial reports to analyzing stock data to waiting for the right time to buy/sell.

Spending this much time on something intangible will cause most people to quit soon after and miss out on investing entirely.

The third, and final, reason is that passive investments tend to perform more predictably.

I talked before about the importance of predicting portfolio performance to accurately prepare for financial milestones.

By far, the most predictable investment strategy is passive investing (especially when investing in the overall market) since you can rely on historical performance to closely predict future results.

Sneak Preview

I am working on a course to help beginners Learn to Invest in 1 Hour.

What I want from you is any suggestions of topics you’d like to be covered in this guide.

Here is a screenshot of the overview page of what will be covered:

General advice is great, but personalized advice is truly powerful.

Schedule a FREE 1-on-1 introductory coaching call wth me to take the next step on your financial journey.