How to be a successful investor: Following a strategy that’s right for you

There’s more to being a successful investor than following the latest market trends and tips. Setting out a strategy that’s right for you could allow you to balance risk against your goals. 

Last month, you read about the importance of defining what success means for you. With your goals outlined, you can start to think about an investment strategy. Here are some of the factors you may need to consider.  

The guide to creating an investment strategy that suits your needs

To be a successful investor, you may think you simply need to choose the “best” shares that will deliver the highest returns. However, it’s impossible to consistently pick the top performers, as numerous factors affect outcomes. 

Indeed, according to research from Schroders (29 August 2024), in 12 of the 18 years between 2006 and 2024, no US stock that was a top 10 performer in one year also made the top 10 the following year. Even staying in the top 100 was rare – an average of 15 companies each year managed to do so for two consecutive years. 

Instead, creating a strategy that suits your needs could provide long-term investment success. The following steps could help. 

Go back to your investment goal

In last month’s blog, you read about why it’s important to set an investment goal. As you start to think about your investment strategy, going back to your goal may be useful.

Your goal might affect factors such as your investment time frame or the level of risk that is right for you.

Decide how much you will invest 

To create an investment strategy, you need to define your starting point. 

• How much do you plan to invest?
• Will you invest a single lump sum or drip-feed investments over a longer time frame?

Answering these two essential questions could help you compare the expected returns with the amount you need to reach your goals.

Understand your risk profile

All investments carry some risk. However, risk can vary significantly between opportunities, and it’s important that you select investments that align with your risk profile.

As a general rule, the longer your money is invested, the more risk you can take. This is due to a longer time frame providing more opportunities for investments to recover if they experience a dip.

However, time frame isn’t the only factor to consider when deciding how much risk is appropriate. You may also factor in the other assets that you hold, your reason for investing, and your ability to withstand financial losses. Your financial planner can work with you to help clarify your risk profile.  

As well as financial factors, you might also want to consider your investment mindset. If you’re worried about losing money and could respond emotionally if markets experience volatility, you might opt for a more risk-averse approach. Again, your financial planner can offer guidance about what’s right for you and give you confidence in your investment strategy. 

Ensure your investments are diversified 

Once you’ve created an investment profile, you may start to look at what investments align with it. 

Rather than investing in a handful of assets, most investors can benefit from diversifying their investment portfolio. This means investing in a range of asset classes, regions, and sectors. 

Diversifying allows you to spread investment risk. So, if one company performs poorly, this may be balanced out by stability or gains in other areas of your investment portfolio. 

Investment funds might provide a simple way for investors to diversify their portfolios. A fund will pool your money with that of other investors to invest in a range of companies and assets in line with its objectives. 

Working with a financial planner who understands your goals means they can advise you on which investments or funds could create a balanced portfolio that’s right for you. 

Contact us to talk about your investments 

If you’d like to work with us to create your investment strategy, or have us review your existing one, please get in touch to arrange a meeting. 

Next month, read our blog to find out what comes after creating your investment strategy – for many investors, it involves patience and focusing on their end goal. 

Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. 

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.