How to Stay On Top of the Investment Game In a Rapidly Changing World?

The investment world is very dynamic and can change immensely in a few years.

While the stock market is riddled with uncertainty, one can rely on several investment strategies to stay at the top. Some investors lock profits while some reinvest, but the point is to set aside a portion of your profits from investments. This will ensure you have a source of income for future use and keep you afloat in the investment world till it changes its course again. It's crucial to make investments according to your risk tolerance level.

Here's a list of some investment strategies that can be effective:

Use ETFs

Exchange-traded funds are another popular investment strategy that can ensure stability in the stock market. Instead of investing in a particular company, invest in several assets that constitute an index. When you invest in ETFs you need to know that your money is not just used to buy one asset. But instead, it will go towards stocks and bonds within a fund. And since all these assets have different price movements, they usually balance out, resulting in a low-risk level for investors who use them. Nowadays, more than two thousand ETFs are available on the market, so be sure to do your research before committing your resources to something useless.

Dollar-Cost Averaging (DCA)

Dollar-cost averaging is a strategy used to make investments in the stock market. It involves investing an equal amount of money at regular time intervals. When it comes to this strategy, both the prices and returns must be consistent. This allows for buying more units when the price of a particular asset falls and more minor units when it rises. The idea is simple; if you want more units, then invest less money, and if you want more minor units, then invest more money. Thus, by using DCA, you end up buying more units when they're cheap and fewer when they're expensive.

Buying Stocks That Are Outperforming the Market

This investment strategy is used to identify stocks performing better than the market. Several types of research have shown that if you invest in the top 20% of companies, then your chance of beating another or standard index fund increases exponentially over one year. To identify these stocks, one can look at their financial statements, and their competitors' earnings per share (EPS) reports. If earning forecasts seem high, it would be advisable not to invest in them since they might not meet expectations and eventually suffer losses.

Invest In Gold

Gold has been around for ages, and it's known to be an investment that is stable, timeless, and holds value. You can buy gold through futures contracts. Futures contracts are agreed on between two parties to sell an instrument later for a predetermined price. This type of contract is excellent since it locks in the price of gold for you when you purchase it right away. Now, if the market's gold price increases, then the other party will have to compensate you with additional money, thus resulting in losses for them and profits for you.

Investing Outside Your Country of Residence

This is one of the most favored investment strategies and is used by millions of investors worldwide. The idea here is that if an investor makes investments in a country other than his own, he'll be able to invest in securities that are not widely held, making it easier for him to gain more profits. For example, as Indian income levels rise, some Indians have begun investing abroad to diversify their holdings and spread risk. American Depository Receipts (ADRs) are popular among Indian investors.

Investing in Foreign Currencies

Another growing trend is investing in currencies of other countries. In the international market, a currency is priced about another, leading to fluctuations, making investments profitable for investors. The trick here is not to put all your eggs in one basket, and instead of buying a foreign currency directly, you can invest in a mutual fund that invests abroad. This way, you get exposure to multiple markets at once and don't have to worry about the intricacies of foreign exchange trading. One such mutual fund is Templeton Dragon Fund Ltd, which invests mainly in Europe and the Asia Pacific. They have been able to beat their benchmark consistently by a decent margin.

To stay afloat in the investment world, one needs to regularly invest, whether weekly or monthly and make sure that a portion of your profits is invested accordingly and not immediately withdrawn. The idea is to invest and reinvest profits to increase your savings pot. It's also important to keep in mind the changing trends and while investing, choose a strategy that has worked for you before or one that you believe will work for you in the future. Remember not to panic during market corrections and always give investments at least a week before selling them off.