Quiz: What’s Your Investing Strategy?

There is no one-size-fits-all way to invest. However, there are some key indicators that one strategy may suit you better than another, depending on your feelings around risk tolerance, and your particular financial goals, level of knowledge, and time horizon. If you’re new to investing or simply revising your strategy, this quiz may give you a place to start.

What Is An Investment Strategy?

Your personal investment strategy refers to the guiding principles you rely on to achieve financial and investment goals. Different investors follow different strategies, varying from conservative to aggressive, depending on a variety of factors, including, but not limited to:

• Age
• Goals
• Geography
• Time horizon
• Financial situation
• Risk tolerance

These factors help investors determine the kind of investments researched and ultimately purchased. 

Know Your Risk Tolerance

Risk, aka how much you can stand to possibly lose, is a huge component of an investment strategy. Some individuals have a high tolerance for risk, while other investors are risk-averse. 

People who are more open to risk, or have a greater investment horizon, tend to employ aggressive plans because they have a longer timeline, while those who primarily want to preserve capital are more likely to take a conservative approach. It comes down to personal preference, too. 

How to Create an Investment Strategy

1. Write It Down

Once you have an idea of what strategy you want to adopt, write down your process and how you’re going to get there. 

2. Believe in Your Plan

Your unique knowledge, through research and experience, is your competitive advantage. Use it regularly within your investment strategy. 

3. Make It Resilient

Good investment managers know where portfolio performance comes from and can explain not only their strategy’s strengths but also its weaknesses. This will allow you to maintain confidence, invest with conviction, and find alternative moves that complement your own.

4. Measure It

Develop a benchmark that matches your financial goals, which in turn, should match your strategy. Do this by setting a target return percentage or comparing your results to a passive market index, such as the S&P 500. 

The Bottom Line

An investment strategy is a plan designed to help individual investors achieve their financial and investment goals. When choosing from a conservative, moderate, or aggressive strategy, you should think about your age, capital, risk tolerance, and goals. As your personal situation changes, you should reevaluate your investment strategy and readjust accordingly.