Top 4 Investing Strategies for 2021!
In this article, we go through the different types of investing strategies that can be used for this year. After the coronavirus pandemic of 2020, new economic and global trends were created which has led to some interesting and new investing strategies long term.
Learn all about what these strategies are across all the major types of asset classes and the best investing account to get started with which has some of the lowest fees in the industry and premium services. Let’s begin!
What are investing strategies?
An investing strategy is simply a method of investing in different asset classes, over a certain time horizon in the hope of making a return on your investment. Some investors may focus on investing cash strategies such as fixed interest bonds and some may focus on investing in real estate strategies.
However, many more individuals are turning to the financial markets for value investing strategies and fundamental analysis of what’s happening in the world. These types of strategies involve stock investing strategies, as well as currency and commodity strategies.
Choosing the right investing strategy will differ for every individual. Investing strategies for retirees and for a younger work would be completely different. It can be difficult to answer what are the best investment strategies to use, as it would be different for each person. After all, everyone has a different risk tolerance and starting point.
What are the Different Investment Strategies?
Overall, there are five different investment strategies investors would use. However, we will focus on what are the 4 investment strategies most applicable to the financial markets.
When trying to understand which is the best strategy for a beginner investor, it is wise to first know the pros and cons of each type of strategy so you understand the benefits but also the risks. Let’s look at the different types:
1. Growth Strategies
A growth investor would typically focus on companies that are growing or expanding at a rapid pace. This is typically determined by analysing a company’s profit growth targets, historical earnings and other fundamental data.
One stock market sector that is known to attract many different growth investors is the technology sector. This is because most technology companies keep on reinvesting any profits to grow the business. It is also why they tend to pay smaller dividends to shareholders, as they prefer to reinvest to grow the business and value of the company.
Source: Admirals MetaTrader 5, #VUG, Monthly - Data range: from 1 Nov 2006 to 25 Mar 2021, accessed on 25 Mar 2021 at 1:30 pm GMT. Please note: Past performance is not a reliable indicator of future results.
The chart above shows the long-term price of the Vanguard Growth ETF (exchange traded fund). This is a fund that invests in a basket of different growth-based stocks. This allows growth investors to invest in the fund without finding the individual growth stocks themselves - a huge saving in time!
Since the 2008 financial crisis, governments have kept interest rates very low, enabling companies to borrow money cheaply and invest it for the long term. This period of time has helped many companies grow exponentially.
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2. Value Strategies
Value investors act in almost the opposite fashion of a growth investor as they try to find companies that are massively undervalued that no one else is focusing on. However, they’re not just looking for cheap companies but rather high quality companies at bargain prices.
A high quality company’s share price may be cheap due to an over reaction to a poor quarter or some supply issues with their products. If investors believe it to be temporary it could be an opportunity to pick up undervalued shares.
For example, during the coronavirus pandemic of 2020, shares in airline companies collapsed. Many investors were focused on distressed investing strategies on some of these hard hit companies.
Source: Admirals MetaTrader 5, #AIR, Monthly - Data range: from 1 Dec 2005 to 25 Mar 2021, accessed on 25 Mar 2021 at 1:30 pm GMT. Please note: Past performance is not a reliable indicator of future results.
The chart above is of Airbus Group’s long term share price. It’s clear to see the collapse in the aeroplane maker’s share price during the 2020 pandemic. However, after the price dropped more than 60%, the share price recovered and surged higher more than 115% from March 2020 to early 2021.
This was an example of a high quality company - as evident by the rising share price before the pandemic - trading at a huge discount to what it’s actually worth. It’s one reason value investors focused on companies like these, after the pandemic.
3. Contrarian Strategies
A contrarian investor is someone who goes against the trend or consensus of the market. It’s a highly skilled and specialised type of investing. After all, if a market has been going up it takes a lot of patience and guts to think the opposite way and use bear market investing strategies.
This was the case in Tesla for many years. The stock price kept on rising, while many hedge fund managers kept on shorting the stock. Even the bigger players with years of experience can get it wrong.
This also highlights why it is important to ignore the hype and all the noise in the market nowadays - investing strategies apps that promise to do the work for you, ETF investing strategies Reddit traders used to force stocks in a certain direction. It may prove wiser to focus on sound investing strategies long term.
Fortunately, there is some support on hand whether you are a complete investing newbie or focused on investing strategies for seniors or looking to improve your edge.
With the Premium Analytics feature provided by Admirals, you can access the Technical Insight Lookup Indicator which provides you with actionable insights and trading ideas across thousands of different markets!
Source: Admirals Premium Analytics, 25 March 2021
For example, in the screenshot above of the Technical Insight Lookup indicator, we have searched for Apple (#AAPL) stock. At the time of writing, the indicator has found 14 technical events that are taking place over the short-term, intermediate-term and long-term.
This can be a great addition to your trading toolbox and is also a great educational tool to learn more about different technical trading indicators and how traders use them to make decisions.
4. Momentum Strategies
Momentum investors focus on stocks that have been going up and invest on the assumption they will continue to go up. They are looking for the momentum to continue and are often called trend following investors.
The currency market is known for momentum-based trading. This is due to the large liquidity available trading the currency market and the potential to profit from rising and falling markets using Contracts for Difference (CFDs).
In fact, with CFDs, you can trade to the long side and short side on a wide variety of different asset classes such as stocks, indices, currencies and commodities. With Admirals, you can open a Trade.MT5 account for CFD trading and an Invest.MT5 account for investing - and then manage both from just one place, the online Trader’s Room!
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About Admirals (formerly Admiral Markets)
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