Investing Strategies
Investing Strategies
Just like there are several types of different stocks, there are different types of people that buy them. Some of us enjoy a defensive portfolio, resistant against downturns in the market at the cost of potential growth, some of us want an extra stream of income pouring in through dividends. Others, like me, prefer an aggressive approach to the stock market, leveraging large amounts of money to make exponential growth for our portfolios.
In this article I will detail all of the different types of strategies, and which one you should utilize.
The Defensive Investor
The defensive investor is the person who doesn't like risking their capital but wants to beat out a savings account for growth. Unfortunately, while nobody likes risking their accounts, the Defensive Investor typically sees the lowest returns of them all and isn't recommended as a long-term investing strategy. However, in bear markets, it's likely that they're going to be one of the few investors still making a profit.
What to invest in:
Government Bonds
Money Market Funds
Low Volatility Indexes ($SPLV, $VHT, etc.)
Consumer Staples stocks (Companies producing essentials like food, beverages, etc.)
Gold, Water, Gas, and other necessary commodities
The Value Investor
Long hailed as the gold standard for new investors, value investing relies on buying stocks for their value, rather than worrying about the price. Value investing focuses on tangible values such as ownership, financial reports, and overall fundamentals to achieve long-term success.
The Value Investor ignores market headlines that pump and dump the values of stocks, and instead choose quality stocks that they believe are undervalued by the market.
What to invest in:
Value ETFs ($SPYV, $VOOV, $MOAT (<- one of my favorites), etc.)
Small amounts of Government Bonds
Companies with good fundamentals (P/E ratio, P/B ratio, small debt, etc.)
The Dividend Investor
The Dividend Investor is the investor that seeks to slowly build an additional source of income, often to help fund their retirement. These people tend to be older, often retired, but many young people are in this group as well.
Dividend stocks are stocks that pay out a dividend to shareholders, often four times a year (quarterly). They usually pay out around 2-3% of the share price annually.
The truth is, without large sums of money, you won't be able to build a livable income right off the bat, but you can get a good start. By far the most popular way to build dividend income is with the Dividend Aristocrats ETF, a collection of large companies that consistently increase their dividend every year.
REITs (Real Estate Investment Trusts) are also popular. These are ETFs that operate similar to stocks, but instead of buying ownership in a typical company, you are buying ownership in a real estate operation. These are attractive for dividend investors because they are required to pay out 90% of their income to shareholders.
What to invest in:
Dividend Aristocrats ETF ($NOBL)
Value ETFs ($SPYV, $VOOV, $MOAT)
REITs ($NRZ, $XLRE, $ICF)
Solid companies with a long track record of dividend payments
Disclaimer: Beware of stocks with high (>5%) dividend yields. These stocks are often volatile and have bad business practices, and the high dividend yield is used to lure in unwary investors.
The Aggressive Investor
The Aggressive Investor has no problem leveraging large sections of their portfolio towards growth stocks, most of the time in the tech sector. Of all the investors, they're most likely to make the highest return on the year, but in bear markets, they're most likely to have the biggest losses.
While they aren't investing for the memes, some of the companies they invest in may have iffy fundamentals, such as a P/E ratio exceeding 500, and they aren't shy about throwing money at it if they believe the stock is currently way undervalued.
What to invest in:
Growth ETFs ($SPYG, $VOOG)
Technology stocks that innovate ($TSLA, $AMZN, $GOOG)
Promising startups in the tech industry
Disclaimer: While you shouldn't be investing money you can't afford to lose, this is especially important for the Aggressive Investor.
The Meme Lord/WSB Autist
The Meme Lord/WallStreetBets Autist only follows media headlines and the trending stonk on WallStreetBets. They will risk their entire portfolio, often on margin, on a single trade in a retard YOLO play to score tendies and retire a multimillionaire at 22 (results may vary). Options trading is required.
What to invest in:
The first stonk you see on r/WallStreetBets
Doing the opposite trade of the highest upvoted post
Stonks with funny names
Honorable Mentions
The guy who only invests in pot stocks
The day trader
The Bitcoin nerd
The gay bear 🌈🐻
The Texan who has his entire net worth in oil stocks
Conclusions
There is no 'best' investing strategy, but if there was, it would likely be a mix of these. It's definitely reasonable to have an overall aggressive portfolio with dividend stocks on the side, or value investing with a small section of your portfolio dedicated to WallStreetBet gambles.
Always diversify your accounts. There is no reason that one stock should make up over 50% of your portfolio without extensive research.