Types of Investment Portfolio Strategy

Posted by sentifi on June 7th, 2017

In the sphere of finance, an investment strategy can be explained as a set of rules, behaviors or procedures, formulated to guide an investor's selection of an investment portfolio.  Portfolio is a process of financial assets grouping, like for example, stocks, bonds and cash equivalents their fund counterparts, which can also include mutual, exchange-traded and closed funds, etc. In simple words, various different investment assets mixed and matched for the purpose of achieving an investor’s financial goals is called a Portfolio. Investment Portfolio Strategy can be helped getting appropriately and efficiently designed and formulated by experienced financial service providers..

A portfolio allocation and management method are observed to balance the risk and return efficiently. Such portfolios get usually divided impartially between equities and fixed-income securities Investors can directly hold portfolios and/or it can get managed by financial professionals.

Items that are included as a part of your portfolio can contain any asset you possess like the real items such as art and real estate, and even equities, fixed-income instruments and their cash and equivalents. Aggressive Investment Strategies are always considered most suitable for investors as they can provide the highest possible return, ready to take high risk, higher investment in equities gets possible and also a longer time horizon can be availed than..

Investors who do not like taking much risk with their investments will however find a conservative portfolio strategy more suitable. Investors who do Day trading or have a shorter time horizon will also find this type of portfolio strategy more appealing to their interest. This portfolio comprises primarily cash and cash equivalents, or high-quality fixed-income instruments. Conservative Portfolio basically is about 70-75%v of Fixed Income securities and 5-15% Cash equivalents.

50-55% Equities; 35/50% Fixed Income securities and 5-10% of Cash and equivalents make a Moderately Aggressive Portfolio. This kind of portfolio is appropriate for individuals with a longer time horizon and ready to take average risk. Investors who find these types of portfolios suitable to their interest are actually trying to balance the amount of risk and return contained within the fund.

You can have a say in what type of Portfolio you would like to opt for by taking into consideration the risk you can tolerate, your time horizon and as such. Investment Portfolio Strategy is in general of 5 types which are

1. The Aggressive Portfolio
2. The Defensive Portfolio
3. The Speculative Portfolio
4. The Income Portfolio
5. The Hybrid Portfolio

The Speculative Portfolio is considered to be more risky compared to other 4 types. Impressive flexibility can be enjoyed in Hybrid Portfolio. Income Portfolio is best for people looking for arranging retirement income as it generates positive cash flow. Defensive Portfolio is advised to most investors.

Formulating portfolio strategy is not a child’s play that any novice can do. You need to opt for one after careful consideration. Portfolio strategy is actually a road map which instructs investors how to use their assets to achieve their financial targets. Portfolio theory also refers to the design of optimal portfolios and its implication for setting asset pricing.

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