10 factors that will make or break your investment strategy (2024)

FAQs

10 factors that will make or break your investment strategy? ›

An investment strategy is a plan designed to help individual investors achieve their financial and investment goals. Your investment strategy depends on your personal circ*mstances, including your age, capital, risk tolerance, and goals.

An investment strategy is a plan designed to help individual investors achieve their financial and investment goals. Your investment strategy depends on your personal circ*mstances, including your age, capital, risk tolerance, and goals.

The rule stipulates investing 90% of one's investment capital toward low-cost stock-based index funds and the remainder 10% to short-term government bonds. The strategy comes from Buffett stating that upon his death, his wife's trust would be allocated in this method.

Interest rates (the cost of borrowing) Economic growth (changes in demand) Confidence/expectations. Technological developments (productivity of capital)

Investment choices can be impacted by a wide range of external and internal variables, such as the economy, market trends, and one's own personal situation [2]. One of the key factors that can influence investment decision-making is the state of the economy.

Risk factors consist of interest rates, foreign currency exchange rates, commodity and stock prices, and through their non-stop fluctuations, it produces a change in the price of the financial instrument.

Key Takeaways

An investment can be characterized by three factors: safety, income, and capital growth. Every investor has to select an appropriate mix of these three factors. One will be preeminent. The appropriate mix for you will change over time as your life circ*mstances and needs change.

Three factors affecting the required rate of return are – the real rate of return, inflation premium, and risk premium.

What makes investing difficult? ›

Learning investing can be challenging due to the volume and speed of information, finding reliable resources, and understanding the reactionary market. However, spending time watching the market and connecting with a mentor can make the learning process easier.

The 10,5,3 rule helps you determine the average rate of return on your investment. Though there are no guaranteed returns for mutual funds, as per this rule, one should expect 10 percent returns from long term equity investment, 5 percent returns from debt instruments.

The income planning version says that you put 30% of your income towards day-to-day expenses, 30% towards investments, 30% for retirement savings and 10% for emergency expenses.

Diversifying Your Portfolio to Reach a 10% Return

A diverse portfolio could consist of 30% in a mix of value and growth stocks, 30% in index funds, 20% in bonds, 10% in real estate and 10% in alternative investments like P2P lending or commodities.

As individual investors make investment decisions, it is necessary to analyze and evaluate which factors are influenced by them. Individual investors are under the influence of three main factors, personal, financial and environmental, while making investment decisions.

Factor style investing, has become prominent in recent years as investors seek to enhance portfolio returns and diversification while keeping volatility low. Factor investing is the strategy of targeting securities with specific characteristics such as value, quality, momentum, size, and minimum volatility.

Choosing an investment strategy will depend largely on your unique financial situation, goals, risk tolerance, age and other factors.