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Grow your wealth by sticking to these four core investment strategy principles

by , 01 July 2015

Before you start investing your money, you should have a strategy in place.

By sticking to a strategy, you're less likely to make mistakes with your investments and give your money the best chance of growth.

So what principles should you include in your investment strategy?

Read on to find out…


Investment strategy principle #1: Asset allocation and rebalancing


When putting together your investment strategy, think about how you’re going to spread your money amongst different asset classes.

Different asset classes include:

  • Shares;
  • Bonds;
  • Property;
  • Precious metals; and
  • Cash.

Once you decide on what percentage of your investment capital you’re going to put into each asset, you rebalance it periodically. For example, once a year.


Investment strategy principle #2: Diversify broadly


Within each of your asset classes, you should diversify.

For example, when buying shares, invest in different shares across different sectors and company size.

This lowers your investment risk.


Investment strategy principle #3: Have strict buy and sell criteria for your shares


When buying into shares, make sure you don’t invest when the share price is overvalued. Rather wait for a market pullback and buy into the share you want. After all, the lower the price you buy at, the higher your profit potential.

Before buying shares, you should know when you’re going to sell. One way to do this is to use trailing stop losses. You decide how much you’re willing to lose on a share and sell immediately if it falls to this level.

By trailing you stop losses, you can also lock in profits you make.


Investment strategy principle #4: Keep your investment costs down


What you pay your stock broker adds up. So ensure your account provides what you need and you’re not paying for services you don’t use.

Every couple of years it’s worthwhile checking out other brokers to see if they offer more competitive rates.

And don’t overtrade. This just makes more money in fees and commissions for your broker.

So there you have it. Grow your wealth by sticking to these four core investment strategy principles.

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Grow your wealth by sticking to these four core investment strategy principles
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