What portfolio management strategies will we consider?
There are several portfolio management strategies that investors can use to achieve their financial goals and manage risk. Here are some of the most common strategies:
1. long-term investment:
The basic idea behind this strategy is to passively manage a portfolio with a long-term perspective. Investors choose a broadly diversified portfolio of stocks and bonds and hold it for the long term, ignoring short-term market fluctuations.
2. Tactical rebalancing:
This strategy involves periodically reviewing and rebalancing the portfolio according to current market conditions and expectations. Investors can change the allocation of assets in the portfolio depending on the expected returns and risk of the different asset classes.
3. Income investment:
This strategy focuses on generating regular income from investments such as bonds with high coupons, shares with dividends or property with rental income. The aim is to provide the investor with a constant cash flow.
4. Growth investing:
This strategy emphasises investing in assets with high growth potential. Investors look for companies with good financial performance, innovative products or services and good prospects for business expansion.
5. Defensive strategies:
These strategies aim to protect the portfolio against unfavourable market conditions and reduce the risk of losses. They include the use of hedging options, investment in highly rated bonds, diversification and risk hedging.
6. Momentum strategy:
This strategy is based on investing in assets that show strong growth in value in the recent past. Investors look for assets with a positive dynamic and expect this growth to continue.
7. Systematic approach:
This strategy is based on using systematic rules to make investment decisions, including automated trading strategies, the use of algorithmic trading and robot investors.
Each of these strategies has advantages and disadvantages and the choice of a particular strategy depends on the investor's investment objectives, level of risk, time horizon and personal preferences. It's also important to remember to regularly monitor and review your portfolio over time.