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4 Basic Questions for Deciding an Investment Strategy

 4 Basic Questions for Deciding an Investment Strategy-Behind a successful investment manager, a scalable and patented investment strategy is their telling secret. However, investment strategy is a new thing to acquire over time.



When preparing an investment strategy, you need to think about the upstream to downstream aspects of the type of fund management that will be applied. This will help keep your investment portfolio from falling apart.

Remember, an investment strategy is the key to making investments that can last for the long term. So, determining an investment strategy is very important to ensure you can be consistent with the process of placing your funds.

Of course the nature of this strategy will be very personal from person to person. That's because everyone has a different interest in their funds; what is the purpose of investing, how long will he manage the investment.

The investment strategy chosen will also affect other financial decisions now or in the future.

The following questions will help you determine an investment strategy that is more measurable and supported by stronger beliefs. This will lead to investments with more consistent performance.

#1 An investment strategy is a process, do you have a big picture of this process?

If you can't explain the process you'll be dealing with with your investment strategy, then you don't know what you're doing.

That is, in determining the strategy, you need to know in detail. Determine what your investment goals are, know the risk tolerance you can face, up to how much nominal funds you can set aside.

After that, also determine the type of investment that you will choose in your "investment basket". This is important because the principle of portfolio diversification is the main investment strategy to deal with volatile situations in the world of capital markets.

write down all the necessary processes in detail so that you can always follow the flow of your investment from time to time. It is also important to evaluate the way you invest in a certain period.

#2 Has the strategy you implemented took into account the under or overvalued volatile situation?

In investing, putting capital in the market implies that you have understood that your funds will be multiplied several times or reduced a lot. This depends on the market situation. Investment strategy is the key to deal with these fluctuations.

Understanding how the market moves is key in evaluating your investment strategy. You really have to be able to manage your funds by paying attention to when the market situation makes your assets under or overvalued.

In addition to fluctuations, the market also often experiences anomalous situations. For example, buying stocks when the market is falling because of the pandemic. You can predict if you buy a stock today, how many times the stock will be overvalued when the market recovers.

#3 Can your chosen investment strategy be applied to any market situation? When will your strategy backfire on you?

There is an old saying on Wall Street, "The market can remain irrational longer than you can remain solvent."

The market can stay irrational longer than you can handle it. Are you ready for your chosen investment strategy to face a completely unpredictable situation?

Good investment managers know that their investment performance comes from and can explain the strengths and weaknesses of their strategies. As market trends and economic cycles change, many major investment strategies will face fluctuating performance trends.

Therefore, it is very important to maintain your confidence in the investment strategy you have chosen. Predict when you need to change your investment goals and period (Long term? Short term?) or the nominal amount of funds that you have previously set.

#4 Have you understood how to evaluate your strategy?

An investment strategy is something that needs to be flexible and dynamic. Why? Because the market moves at any time and often with unexpected results.




Therefore, you need to have a benchmark to measure the effectiveness of your strategy. This means that you need to keep the information up to date from the various indexes. In the US market, the S&P is an indicator of paying attention to the best stocks. Likewise, LQ45 in Indonesia in evaluating stocks moving in the JCI.




Continue to hone your knowledge of renewable tactics and strategies so you can deal with even the most unexpected situations.

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