Question

This question reminds me of the scam emails you always receive stating some unknown relative has died leaving millions from a foreign account. Stating all you have to do is give them some time of personal information, and they will deposit it into your account. This is where the rule of thumb where if it sounds too good to be true, then it probably is plays out. Much to the same effect if you are being offered an investment opportunity where the returns are high with low risk or as the statement says safe. It is without question some type of scam. The rule of thumb with investment is low-risk yields low return while high risk yields a high return. However, there are very few places where you will find a safe investment thesis, not a reality within the realm of investing capital in any shape or fashion. There, however conservative investment plans you could look into, but they will provide conservative returns as well. What type of investment strategies does everyone like to employ?

Answer 1

Types of investment strategies one might employ -

1. Shares -

Shares are considered a growth investment as they can help grow the value of your original investment over the medium to long term. If you have shares, you may also get income from dividends, which are essentially a portion of a company’s profit paid out to its shareholders. Of course, the value of shares may also decline and go below the price you pay for them. Prices can be volatile from day to day and shares are generally best for the long term investors, who are comfortable with these ups and downs. Empirically, shares have delivered higher returns than other assets. However, it is considered to be a risky investment.

2. Property

Property is also considered to be a growth investment because the price of houses and other properties generally rise substantially over a medium to long term period. However, one can not say this for sure, after the housing bubble caused the 2008 Global Financial Crisis. Hence, like any other investment, properties have their share of risk as well. It is possible to invest directly by buying a property but also indirectly, through a property investment fund.

3. Fixed interest Instruments (Bonds)

The best known type of fixed interest investments are bonds, which are essentially when governments or companies borrow money from investors and pay them a rate of interest in return. Bonds are considered to be a defensive investment, that is, these are more focused on consistently generating income, rather than growth, and are considered less riskier than growth investments. As the word "fixed income" suggests, they provide a sense of security to the investors.

4. Mutual Funds -

Mutual funds generally fall into the category of actively managed funds. That means the purpose of the fund isn’t to simply match the underlying market index, but to outperform it. For example, rather than investing in all the stocks in the S&P 500, a fund manager may choose the 15, 30 or 50 stocks he or she believes to have the best future prospects. A lot of people invest in mutual funds as they are not so risky and provide decent returns.

5. Value Investing - Value investing is an investment strategy wherein stocks are chosen based on the fact that appear to trade for less than their intrinsic or book value. Value investors actively seek out the stocks they believe the market has undervalued. In other words, it is a strategy of looking at characteristics of a company like cash flow, operational efficiency, and market competition rather than looking at its current market price and market history.

6. Investment in Gold - Gold investment is worthwhile because it is an inflation-beating investment. Over a period of time, the return on gold investment is in line with the rate of inflation. It is definitely a risky instrument due to its volatility but is investment is done appropriately, it can provide an offset to other assets that aren't performing well and help in great diversification.