The Basics of Crafting your Investment Strategy

investmentplanning
As the global economy heads towards the path of recovery, corporate earnings have started to pick up. The stock market, being an indicator, remains bullish as a result of that.

However, many investors are still reeling from the impact of the global financial crisis that swept across the world in 2008. Many are undecided on whether to invest in the stock market despite the substantial recovery of the markets.

The million-dollar question is: Is it the time to buy now? If the time is ripe, which stocks to buy? Should I engage in speculation?

What you should focus on instead is to understand your investment objectives and time commitments before you devise any investment strategies. You should seek understanding which type of investment strategy suits your preferences. After all, an individual’s investment preference is a vital aspect in crafting a good and sound investment strategy.

To understand your investment preference and craft your investment strategy, here are three simple questions to consider:

1. Interest
Are you interested in managing an active portfolio of stocks?

Managing a personal and active portfolio of stocks includes a constant monitoring of the markets and staying abreast with the latest business and corporate information.

If you are interested in the stock market and its workings, select an active investment strategy available to help you pursue investment returns. On the other hand, if you are a not diehard fan of the stock market, then perhaps a simple and inactive investment approach may be the best option available. For example, investing in index funds and/or Exchange Traded Funds (ETF). These are some simple and hands‐off stock investment strategies that the individual can consider. The point is to pick an investment strategy pegged to your interest level.

2. Time
How much time do I have to manage my stock investments?

Some stock investment strategies require more time than others. As a rule of thumb, a good investment strategy should achieve your objectives within the stipulated time constraints. This will facilitate and allow you to dedicate sufficient attention in the management of your stock investment portfolios. On the other hand, if time is an issue, engaging in a buy‐and‐hold strategy may be one of the appropriate investment strategies that you can adopt. Craft your investment strategy according to your time constraints.

3. Capital Appreciation vs. Income Generation
Am I investing for capital appreciation or income generation?

Generally, in the market, stocks are classified as growth or income stocks. Growth stocks are purchased for their expected growth in stock price. They may produce dividends at times. Income stocks are stocks that produce dividend during a specific period of time. (Annually, Semi‐Annually, Quarterly etc) They provide income on a consistent basis. Some examples include Real Estate Investment Trusts (REITs) and healthcare stocks.

After answering the three questions, you should have a better understanding of your investment preferences. Now, you would be better equipped in crafting your personalized investment strategy suited to your needs.

About the Author: Samuel Goh Nai De is the founder of Wisdom Capital, a practice management consultancy firm that specialises in providing financial and investment planning workshops and seminars. He was awarded the MAS Money Sensible Youth Excellence Award in 2006, and since then, he has been holding the appointment of MAS Money Sensible Youth Ambassador. He was also involved in numerous media interviews such as The Straits Times and Money Smart program on Channel 8. For more investment advice and services, you may contact Samuel at This email address is being protected from spambots. You need JavaScript enabled to view it..

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