5 Types Of Investing Strategies: How To Pick The Right One For You

If you’re doing it right, investing in the stock market is much more than picking a few companies, buying a few shares, and hoping for the best.

Smart investors are those that are disciplined and have an investing strategy in place to help guide them as they go along with their investment choices.

I am going to go over five of the most common investing strategies and how to pick the right one for you. After this quick read, you’ll be on your way to growing your wealth and achieving financial freedom.

(Video length 00:10:25)

Income Investing

An Income Investing strategy involves buying securities that are paying dividends. Income investors believe they can expect a steady return on a steady schedule.

Examples of this include; dividend-paying stocks, mutual funds based on dividend stocks, or bonds that produce steady income.

So essentially, income investing involves securities that are paying returns. And this is what people are hoping to do if they don’t know much about investing.

By the time they get to retirement, they’re typically starting to load up on the bond side of these kinds of securities, where they get almost a guaranteed income off of the bonds and a lot less in terms of stocks that are not paying dividends.

Pros

  • Returns can be decent while keeping the risk pretty low.
  • If you have a huge capital to begin with, you don’t need to risk it on betting on the success of a business, and instead, you can live off of the interest earned off dividends.

Cons

  • This type of investing strategy requires a large sum of money upfront in order to see returns that we can get excited about. The average investor that is starting out simply doesn’t have the capital to see major benefits from this form of investment.
  • Income investors tend to focus more on the dividend rather than the value of the underlying company or asset they are investing in.
  • It can take a long time to see meaningful returns when practicing income investing, which isn’t great for those looking to create financial freedom and retire quickly. We’re talking 1-2% returns over a long period of time.
  • If you go for higher dividends and higher rates of return, you’re starting to get into a more serious risk that can really backfire on you in the long run. If it’s income you’re after, you certainly don’t want a lot of risk involved.
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