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Creating Your Investment Strategy Essay

752 words - 4 pages

I am often asked which instruments make good investments. It may sound a bit dry but I have always said that it depends on what you have and what you need.

This sounds like a cop out. It isn’t. The reality is that HOW you invest will be determined by:

* How much you are investing
* How big a loss you can afford to accept just in case,
* How often you wish to generate returns,
* How long you want to keep your investments,
* How you react to uncertainties and
* How much access you have to information that you would need to monitor and manage your investments.

Investment gurus may impress you with their so-called secret methods, but the truth is, it’s all a ...view middle of the document...

They would be interested in more “sophisticated” instruments that go by different names – derivatives, for their higher possible returns and tax benefits. The offer of better returns for these types of investments comes at the price of more risk and a larger minimum investment.

‘Getting there’

A notch below the “Haves” is the group I call “Getting There”. They have both the wealth and income to be comfortable but not yet at par with the “Haves”. Their investments cover a wide range of instruments, which often reflects a strong tolerance for risks that they have specifically considered.

They have some access to investment information but it is often something that they would have to gather themselves. Investors in this group do not have the luxury of their own finance specialist. But if they do seek formal advice it would make good sense to suggest a portfolio of medium-term (i.e., one to three years tenor) instruments where something matures every six months or so. The intent is to mimic a longer-term pool that gives a recurring income but provides an “exit window” of six months just in case the need arises.

‘Liquidity savers’

The majority of Filipino savers...

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