When you start investing on your own, the world of investment can seem esoteric and overwhelming, which is why so many people do not invest. However, using some time-tested strategies can help to simplify the world of investing for you. As a beginner, these four popular investment strategies can help you kick start your investment journey and achieve your financial goals, setting you up for a lifetime of financial security.

Buy-and-Hold Investing

You might have heard the expression that successful long-term investing is all about ‘time in the market’ and not ‘timing the market’. For most investors, especially beginners, it is hard to predict ups and downs with any regular degree of accuracy and as such, market timing strategies can result in significant losses or missed investment opportunities. Instead, you can employ a buy and hold strategy. Essentially, buy-and-hold or passive investing is the opposite of trying to ‘beat the market’. It involves buying either shares or funds of proven successful companies and holding them for an extended period, typically years or even decades. The thinking with this strategy is that equity markets, over time, give a good rate of return despite market fluctuations. Hence, you should focus on selecting solid investments in high-quality businesses, stay invested, and over time, you are rewarded for leaving your investments in the market. Importantly, employing this strategy at the outset can also buy you time to better understand the market and, as you learn, explore other strategies.

Dollar-Cost Averaging

When thinking about investing, one consideration is whether to invest funds all at once or over a period of time. If you choose the latter route, you might opt for an investment strategy called dollar-cost averaging. Dollar-cost averaging (DCA) involves investing a fixed amount of money at regular intervals (such as monthly or quarterly), regardless of market volatility, so that the total price paid is spread out and less affected by market timing. This strategy effectively eliminates the effort required to attempt to time the market to buy at the best prices. It also reduces the impact of market volatility by buying more shares when prices are low and fewer shares when prices are high. However, an advantage of DCA is that by investing in smaller set amounts over time, you’ll buy when prices are low and high. Over time, this approach can lead to a lower average cost per share. DCA can be especially powerful in recessions and bear markets. Therefore, committing to this strategy means that you will be investing when the market or a stock is down, and that’s when investors can potentially score the best deals. Dollar-cost averaging is one of the best strategies for beginning investors, and even more seasoned investors, because it keeps you committed to saving, while at the same time reducing the potential risks that could result from market volatility. Again, the focus of this strategy is selecting high-quality investments in strong companies with solid growth opportunities in their respective sectors.

Leveraging Unit Trust/Pooled Funds

Another good way for beginner investors to take tentative first steps in their investment journey is by investing through unit trusts and other pooled funds. A pooled fund is a financial investment fund in which multiple investors contribute money into a single joint investment vehicle to invest in a diverse range of securities. These funds are commonly utilised to achieve economies of scale, reducing transaction costs and expanding investment opportunities, while maintaining effective management. Pooled funds allow investors to gain exposure to a wide range of geographies, asset classes, and sectors that may not be accessible to individual investors. Because they have funds from many investors, pooled funds have scale and can spread the funds across many investments guided by the investment objectives of the fund. This helps mitigate risks by allowing the fund to diversify across sectors, geography, or assets. Two examples of pool funds include CI Mutual Funds and the funds in NCBCM Unit Trust Scheme, including the Real Estate Fund (rE Fund). The CI Mutual Fund offers investors diversification benefits and exposure to the global capital markets through portfolios of debt and equity securities denominated in US dollars. Therefore, investors can access global securities that may have been otherwise unattainable or expensive to acquire. On the other hand, the rE Fund focuses on a diversified portfolio of high quality commercial and residential real estate assets, with a primary focus on local and regional assets. Both options provide solid opportunities for real return in the near to medium term. Importantly, pooled funds are managed by professional fund managers who have deep knowledge and expertise in selecting and managing investments. This means investors can benefit from professional investment management, which can be particularly beneficial for those who lack the time or expertise to manage their own investments.

Diversification

Diversification is a risk-mitigation strategy that investors should be very aware of. It is a common investment tool used to hedge against portfolios taking large losses. It subscribes to the “don’t put all your eggs in one basket” principle. By mitigating risk, diversification actually seeks to maximise returns by allocating investment funds across different assets, industries, companies, and geographic locations, among other categories. Having a diversified portfolio potentially minimises the impact of poor performance in any single asset. However, it is important to remember that, regardless of how diversified your portfolio is, risk will never be 100 per cent eliminated, but it is best to diversify your portfolio to balance risks.

As a beginner investor, there is no need to feel overwhelmed when it comes to investing. As you can see, there are investment strategies that do not require significant levels of expertise that you can implement. These time-tested strategies will help in simplifying the process as you begin your investment journey. Capitalise on them and kick-start your journey to achieving financial well-being.