Professional Strategies for Disciplined Investors

Your years of financial markets experience and the ability to constitute reliable investment strategies may often generate profits. But, you must be aware that strategies do not always work in your favor. Sometimes you may have to live through immense volatility where nothing seems to work. A long term investor can easily ride through uncertainty by following a simple rule, buying stocks of good companies at fair prices and holding on to them.

Fair Value and Fair Pricing: 4.95$ / Trade

Well, its easier said than done. Its not just about finding quality companies trading at low valuations, but holding them patiently through thick and thin is far more challenging. So, whether you are an active investor or a professional day trader, you must realize that without maintaining a proper disciplined approach its less likely that you will stay profitable and become successful in the long run.

Its the discipline that more than anything else helps you outshine as a professional investor. An investment strategy only helps in focusing towards an investment objective, rest everything depends on how efficiently you follow your own set of rules. Now, let’s discuss a few interesting investment strategies, and later in this post I will tell how you can develop your own strategies that can help you stay on top of fast changing market trends.

Strategic Portfolio Allocation: Selecting less correlated Asset Classes

Your long term investment plan should have a strategic allocation mix of assets with low correlation, so that you effectively capitalize on diversification objectives. Rebalancing a strategic asset portfolio is another task that an investor needs to take care of on regular basis. Rebalancing can dramatically impact your investment profile in the short run but over the long term you do not deviate much from your investment strategy. For example, if you are a growth investor and have 30% allocation in bonds and 70% allocation in equities, after a severe bull market you should switch your portfolio to 50% bonds and 50% stocks. Doing so will ensure that you lock in some amount of gains and then wait for significant amount of correction in stock to rebalance again and get back to your initial growth investing allocation.

Rebalancing is not a onetime task; you should at least evaluate your investments once every year. Basically, it’s a buy low sell high strategy where you sell outperformers and increase exposure to laggards.

Tactical Positioning of your Asset Portfolio: A Strategy for Smart Investors

This strategy requires an ability to forecast trends in different investments as positioning yourself for a trend can prove to be a risky endeavor if things don’t pan out as expected. This is a simple strategy where you go overweight in assets which you expect to outperform and get underweight in assets which are likely to remain subdued. For instance, if you expect US stock markets to underperform in 2012, then you may reduce your equity exposure to 30% and keep the rest in bonds, cash and gold.

Choosing a Stock Investing Strategy

When restricting your investments to stocks, you can improvise countless strategies to make buy and sell decisions. However, one has to be sure of what kind of strategy is suitable in accordance to his risk bearing capacity. Once you understand that, you can easily pick from value, growth, defensive and momentum investment strategies. Then you can adopt from technical and fundamental approaches depending upon your understanding of the two and you can also strategize on two basic approaches ‘top-down’ and ‘bottom-up’.

In the following post we will discuss how you can form your own investment strategy, outlay the allocation mix that best suits your investment profile and few more tips on how one can actively manage an investment portfolio unperturbed from volatile market conditions.

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