Key Concepts to Unlock Investment Strategies

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With all the turmoil currently going on in our world, I thought it would be useful to get back to the basics. It’s essential to understand the different investment strategies and how they fit your goals, timeline and personality. Even as the world goes through radical changes, certain foundational principles hold true. 

In my most recent article (add link) for Forbes, I explore three different opposing strategies — time the market vs. time in the market, buy and hold vs. active investing and huge returns vs. huge losses. Following is a quick synopsis of the article.

Timing the Market vs. Time in The Market 

To generate wealth by timing the market, investors need to be smarter than the market, which isn’t a sustainable strategy according to efficient market theory. This approach pairs the potential for large gains with the likelier potential for large losses.

Prioritizing time spent in the market by simply buying and holding quality stock is much less likely to generate enormous short-term gains. Still, it can generate long-term wealth since the market has historically increased in value over time.

Buy and Hold vs. Active Investing

When you buy and hold stock, you avoid the risk of timing the market because you’re invested for the long haul. Instead of gambling on the short-term success of a stock, you invest in its ability to endure inevitable market downturns and generate wealth over time. This means investing in companies positioned for survival and growth.   In contrast, to buy and hold, an “active” investment strategy means portfolios can be adjusted on a frequent or even daily basis to take advantage of every opportunity for short-term value gain. Successful active investing can make

investors a lot of money, but with significant risk that compounds over time and the additional cost and tax consequences of frequent trading.

Huge Returns vs. Huge Losses

Because you need money to make money – at least in the stock market – one shouldn’t invest where they could potentially lose all of their money. Investors chasing huge returns can easily incur huge losses. The average investor may end up with higher returns overall by making above average returns consistently versus making huge returns occasionally.

Click here to read the entire article in Forbes and explore these strategies in more detail.  

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