Hypo Venture Capital Balanced Investment Strategy for Portfolio Management
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Balanced investment strategy is perhaps the most followed and successful investment strategy for portfolio management. Its primary aim is to keep a balance between investment risk and return. A balanced investment strategy combines the merit of aggressive and defensive investing strategies.
Aggressive investment strategy involves investing in high return high risk investments with the sole purpose of maximizing return from investments. It involves allocating major portion of portfolio capital to invest in equities, equity based funds and highly volatile markets. Investors following aggressive investment strategy often look for comparatively short-term profiting and wish to invest more in growth stocks, and small caps and mid cap stocks. Advantages of aggressive investing include quick profit, high return over investment and no need of large portfolio capital. It can work really well for experienced investors and investors who are very strict in their money management. Disadvantages include high risk, high volatility in total portfolio value and no surety of profit. It less supports novice investors and investor looking for monthly earnings or living costs.
Defensive investment strategy is just opposite of aggressive investment; itâs purpose is to preserve the capital and ensure some return from investments. It involves investing in low profit low risk investments like bonds, money market funds, treasury notes, and equities with minimum price volatility and good dividends. Defensive investors look for long-term profits and/or monthly earnings. Advantages of defensive investment strategy include reduced risk, predictable income, better investment planning and diversification of portfolio. This strategy mainly suits beginners. Disadvantages include low return from investments and requirement of high capital investments.
In balanced investment strategy, the investor tries to keep a balance between his aggressive and defensive behaviors. It involves balancing of both return and risk by diversifying investments in both high return high risk and low return low risk investments. Balanced investors often follow a portfolio capital allocation rule telling how much to invest in equities and bonds and how much to invest in treasury notes, precious metals and funds. Usually one portion of portfolio is actively managed and other portion is left to grow automatically. Balanced investment strategy can be slightly aggressive or slightly defensive with respect to investments made.
The greatest advantage of balanced investment strategy is the diversification of portfolio and hedging against high total portfolio value volatility. It is good for investors looking for medium-term (3 to 5 years) profits. Other advantages include flexibility in portfolio management, better results with better capital investments, (almost) predictable income and manageable portfolio risk. Balanced investment strategy support both beginners and experienced investors and can be an option for monthly earnings for living.
Investing in your priorities
A socially responsible strategy allows individuals to invest in a way that is consistent with their own priorities. As indicated by performance in recent years, choosing to invest in this manner does not mean sacrificing potential return. However, not all investments will perform in the same way.
If this method of investing interests you, work with your Hypo Venture Capital financial advisor to learn more about how SRI options can work in conjunction with your overall investment strategy. There are a number of mutual funds to choose from that can be incorporated into an existing or proposed asset allocation strategy. Alternatively, you can select specific investments that fit more particular criteria or apply your own social screens to your managed portfolio. Be sure to consider how any investment you choose matches your risk profile and your return expectations.
The most effective approach to socially responsible investing is to make sure that the execution of the strategy is consistent with your overall financial plan. Your HVC financial advisor can help you review your current asset allocation and help you consider whether social investing is right for you.
Hypo Venture Capital is an independent investment advisory firm which focuses on global equities and options markets. Our analytical tools, screening techniques, rigorous research methods and committed staff provide solid information to help our clients make the best possible investment decisions. All views, comments, statements and opinions are of the authors. For more information go to www.hypovc.com
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