An Overview of Investment Strategies

Investment strategies are essential for building and managing a portfolio effectively. Here are several popular strategies that cater to different risk tolerances and investment goals:

Buy and Hold

The buy-and-hold strategy involves purchasing investments and holding them for an extended period, typically several years. This approach emphasizes long-term growth, allowing investors to ride out market volatility without the stress of frequent trading. The key advantage is the potential for substantial returns over time, as well as avoiding capital gains taxes by not selling investments. However, it requires discipline to withstand market downturns without selling.

Index Investing

Index investing is a passive strategy where investors buy index funds that track a specific market index, such as the S&P 500. This method provides built-in diversification and typically lower fees compared to actively managed funds. Investors benefit from the overall market’s performance rather than trying to outperform it.

Dollar-Cost Averaging (DCA)

Dollar-cost averaging involves consistently investing a fixed amount of money at regular intervals, regardless of market conditions. This strategy mitigates the risk of market timing by spreading out investments over time, allowing investors to purchase more shares when prices are low and fewer when prices are high. It promotes disciplined investing and can lead to lower average costs per share over time.

Value Investing

Value investing focuses on identifying undervalued stocks that have strong long-term potential. Investors look for companies whose stock prices do not reflect their intrinsic value, often due to temporary setbacks. This strategy requires thorough research and patience, as it may take time for the market to recognize the true value of these investments. While potentially rewarding, value investing can be risky if the anticipated recovery does not occur.

Growth Investing

In contrast to value investing, growth investing targets companies expected to grow at an above-average rate compared to their industry or the overall market. Growth stocks often reinvest earnings into expansion rather than paying dividends, which can lead to higher volatility but also significant returns if the companies succeed. This strategy is suitable for investors willing to accept higher risks for potentially higher rewards.

Income Investing

Income investing focuses on generating regular income from investments, typically through dividends or interest payments. This strategy is popular among retirees or those seeking steady cash flow without selling assets. Investments may include dividend-paying stocks, bonds, or real estate investment trusts (REITs). The main risk is that income-generating assets can be affected by changes in interest rates or company performance.

Active vs. Passive Strategies

Investors can choose between active and passive strategies:

• Active investing involves frequent buying and selling in an attempt to outperform market indices, requiring extensive research and market knowledge.
• Passive investing, such as index investing, seeks to match market performance with minimal trading activity.
• Both approaches have their merits and drawbacks depending on an investor’s goals, risk tolerance, and investment horizon.

Selecting the right investment strategy depends on individual financial goals, risk tolerance, and investment timeline. At iWealth, our Financial Advisors work with clients to assess their personal situation to determine what the right mix of these strategies will help them pursue their goals. A well-thought-out approach can lead to successful portfolio management and wealth accumulation over time. If you have questions our team can help you with, please contact us to set an appointment with one of our iWealth Financial Advisors.

LPL Financial Disclosures
The S&P 500 is a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States. Indexes are unmanaged and cannot be invested in directly.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Dollar cost averaging involves continuous investment in securities regardless of fluctuation in price levels of such securities. An investor should consider their ability to continue purchasing through fluctuating price levels. Such a plan does not assure a profit and does not protect against loss in declining markets.

Value investments can perform differently from the market as a whole. They can remain undervalued by the market for long periods of time.

Dividend payments are not guaranteed and may be reduced or eliminated at any time by the company.​

Alternative investments may not be suitable for all investors and should be considered as an investment for the risk capital portion of the investor’s portfolio. The strategies employed in the management of alternative investments may accelerate the velocity of potential losses.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. Bonds are subject to availability, change in price, call features and credit risk.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All indices are unmanaged and may not be invested into directly.