It is too hazardous to invest all of your money in one financial product. Investing in the hopes of becoming wealthy rapidly is another flawed way of thinking. These two strategies are more dependent on chance than on prudent money management. Therefore, a sound investment strategy should provide sufficient returns without impairing cash flow in the near or long run.
Investment Plan
An investment strategy is a comprehensive plan of action that outlines the investment’s risk-return allocation.
Your investment plan may concentrate on growing your wealth through time-limited investments in a variety of asset classes.
Nonetheless, the following options for an investing plan are available to fund and investment managers:
a) Outperforming a benchmark portfolio such as the Nifty 50
b) Investing in sector stocks to increase portfolio size
c) Providing clients with monthly income through stock or bond investments
d) The minimal level of capital protection for equity market investments
e) Keeping the portfolio’s equity to debt ratio constant f) Investing passively in index stocks, often known as replication of index
Your portfolio plan expedites the decision-making process and instills discipline in your investing endeavors. The first requirement for any investment strategy is to remain calm and avoid the market noise.
One of the following three forms of investment strategies must be used by individual investors:
Growth strategy: prioritizes investment growth at the expense of possible tax and liquidity compromises.
Preservation Strategy: Prioritizes protecting capital from taxes, inflation, and market hazards.
Distribution or Income Strategy: Produces consistent revenue and has the ability to make risky or safe investments.
Things to Think About When Creating an Investment Strategy
One of the tried-and-true methods for accumulating wealth and reaching your objectives is investing. There are several ways to invest money, and how you diversify your holdings depends on a variety of factors. The percentage allotted is determined by:
Your financial objectives
Life objectives
A willingness to take risks
Level of income and projections
Individual circumstances
Different Investment Strategy Types
To create riches, you need to be extremely patient, plan ahead, and do your research. Following the original, well-thought-out plan is crucial, unless, of course, extraordinary circumstances call for a different course of action.
Here is a list of a few suggested and tested investment strategies:
Active: An active strategy is the most effective way to profit from market volatility that occurs in the near term. But don’t forget about the transaction charges. Trading expenses shouldn’t be higher than profits from stock trading.
Passive: In this scenario, you monitor your investment but do not make any immediate financial transactions. If you stick with it, the returns will be better. Unlike an active strategy, under this approach, you want to stay invested for the long run since you think you cannot beat the market in the near term.
Growth: This hybrid strategy is based on both the stock’s trend and the fundamentals of the underlying company. You could want to invest your money to create a corpus if your estimates indicate that the company will grow over the medium to long term.
However, you may choose to put your money on hold for the near future if you believe the company will generate strong returns in a year or two.
Value: Using price to book ratio to make investments provides an intrinsic perspective of the stock and how it might perform in a market correction. There is an easy logic at work here. During stock declines, buy while the price is low. In an eventual market correction, the value of these cheap stocks will increase. If you sell at that point, you will get big returns.
Income: Here, the goal is to generate cash from bond interest and dividends. An income-targeted investing approach is the most effective if you’re searching for consistent, reliable, and sustained cash flows.
Indexing: With this approach, you put money into equities that are included in indexes. Consider NIFTY50 and NIFTY BANK.
Investment Opportunities in India Using Automated Techniques
Examine various investing alternatives that allow you to either pre-determine the allocation of your investments among debt funds, corporate bonds, government securities, and equities.
Insurance Plans with Unit Links (ULIPs)
ULIPs are good investment choices since they allow you to allocate your assets to a variety of funds with little to no human intervention:
You can be assured of total automation and peace of mind with the Systematic Transfer Option (STO) and Automatic Fund Rebalancing (AFR).
Investing in stocks at an early age can help you become wealthy.
The money may be transferred to debt instruments as you get closer to retirement in order to protect capital.
You also save on taxes because section 10(10D) exempts the returns from ULIPs from taxation.
ULIPs include both an investment and an insurance component. ULIPs permit withdrawals based on milestones.
The PPF, or Public Provident Fund
PPF is a regular, long-term investment choice that provides both growth and capital safety.
Public Provident Fund, which will have a set interest rate of 7.1% per year starting on January 1, 2022.
You don’t need to do anything to earn compound interest on investments up to Rs 1.5 lakhs each year.
While all withdrawals from PPF accounts are tax-free, the amount deposited into the accounts is deductible from taxable income under Section 80C. Consequently, you also save on taxes.
The NPS, or National Pension System
NPS is a long-term savings plan that prioritizes retirement. The plan enables you to
Invest money however you see fit in stocks, bonds, government securities, and other funds, or select an automatic portfolio.
Taxes are not applied to NPS investments at the maturity or annuity phases (up to 40%).
Under sections 80C and 80CCD(1B), contributions to the NPS are exempt from taxable income. Here, too, you will save on taxes.
You can withdraw and invest 60% of your corpus in annuities for a conventional pension, and NPS adheres to the growth strategy.
Modify Your Investment Strategy Over Time Investing necessitates a precise action plan that is reviewed on a regular basis. Investment diversification across asset classes and instruments is a tried-and-true tactic. The secret to investing is patience. The length of the investment depends on a number of variables that affect your situation.
Choosing the appropriate investing strategy will help you achieve financial independence and reduce financial stress. That being said, you should periodically review your investment approach.
Disclaimer: This article is intended exclusively for general informational purposes and is published in the interest of the public at large. It is recommended that readers proceed with caution and not consider the information in the article to be definitive. In this regard, readers should conduct additional research or speak with an expert.
SEE ALSO: 7 Steps for the Profitable Investing Experience
Thao Pham 
Viet Tran 
Na Na