Have you ever heard of an aggressive investing strategy? Or do you know the term aggressive investor? can! Simply put, this is a strategy that investors use with that risk profile. However, using this strategy has its own risks and challenges as well. What are they? Check out the discussion below:
Understand aggressive investment strategies
quote from page InvestopediaAn aggressive investment strategy is one that tries to maximize profits. More than just keeping your funds safe This strategy is generally used in the form of portfolio arrangements.
It is said that investors have an aggressive investment strategy. If he seeks to profit by allocating his capital to high-yielding and risky instruments such as stocks, commodities, However, this level of aggression is relative to other investors’ portfolios.
For example, we have Investors AB and C. Investor A has a portfolio consisting of 50% stocks, 25% bonds, and 25% mutual funds. Investor B has a portfolio of 25% stocks, 25% bonds, 25% mutual funds, and money. 25% deposit Investor C has 10% forex portfolio, 35% stocks, 35% bonds, and 20% deposits. It can be concluded that Investor C’s strategy is the most aggressive, Investor A is the second most aggressive, and Investor B is the most cautious.
Aggressive investment strategies are often suitable for young investors. In addition to the technological response This investment strategy also requires investors and traders to actively participate in the creation and execution of trading strategies.
Examples of active investment instruments
1. Stocks with low market prices
The first example of an aggressive investing tool is stocks with low market capitalization. These types of stocks generally carry more risk than blue chip stocks. This is because the stocks in this category are less well known and not very attractive in the market.
2. Investing in Developing Countries
Countries in the world are divided into three categories: developed countries. developing country and poor countries. Today, most developing countries are located in Asia and Eastern Europe. including Indonesia In addition to the problems of economic growth and development The socio-political conditions and quality of government in developing countries are often more unstable compared to the socio-political conditions in developed countries.
However, developing countries have the potential for high growth rates. Therefore, investing in developing countries is often more risky than investing in developed countries.
Investing in developing countries can be divided into two ways: investing or trading by buying national currency. or by direct investment by setting up factories or subsidiaries, etc.
3. High-Coupon Bonds
High-risk, high-yield, high-risk, high-yield, in the context of bonds. The high profit depends on the size of the coupons offered. The company will consider a number of things to determine the number of coupons to offer to potential investors. Items on offer are coupon rates for government bonds and bond ratings from securities rating agencies.
Corporate bonds tend to offer higher coupons than government bonds. Corporate issuers will offer higher coupons than other companies if they receive a poor rating from a rating agency. The aim is none other than to attract investors to buy it. Therefore, high-coupon bonds are risky because they are issued by companies with poor credit history.
Derivatives are Value and price investment instruments based on the value and price of the underlying asset. Typically, these instruments consist of contracts relating to the underlying asset. (basic assetsTherefore, you cannot say that you have invested in the investment instruments associated with the purchase of these derivatives.
Derivatives are said to be aggressive investment tools for a number of reasons, such as requiring a good knowledge of economics and related contracts. and often require a large amount of capital
5. Real Estate Investment
Aggressive investment strategies are not only about financial instruments, but also real estate investment. Due to real estate investments such as building a house or renting a room Relatively high capital required regular maintenance And good marketing. However, if your real estate investment is successful. Real estate profits can be large and last for many years.
Aggressive investment strategies can take the form of “methods” or transactions to trade the above instruments. For example, you buy large market shares with binary options. or buy stocks without any prior analysis
Risks and Challenges of Aggressive Investment
The risk of aggressive investing is as high as with the profit you will receive As with the real estate investments above, for example, if profitable, the profits can be large and last for many years. but if it fails Tens to hundreds of millions of money could float away.
to overcome this An investor or investment manager must be able to implement a serious investment policy. In the context of capital markets and commodity markets This aggressive investment policy takes the form of buying and selling related investment tools to balance or minimize losses in an investment portfolio.
In the context of real estate investing, there are different forms. Real estate investors, in addition to having to diligently market real estate. Of course, prospective buyers or tenants will be reluctant to choose a home or dormitory that is not well maintained. As a result, the price may drop.
How proactive should you invest?
In response to the above question you must know first Risk profile type You first. This is because aggressive investment strategies are not suitable for conservative investors because they are too risky.
Second, determine the level of profit you want to gain and the level of loss you want to avoid. from the profit and loss level You will know which instrument is suitable.
Third, determine the method of transactions. As mentioned above Trading stocks with binary options carries a high level of risk. Although the purchased stock is a blue chip stock. Likewise, buying stocks is good, but not cold or expensive.
Fourth, consider time. An aggressive investing strategy takes time and expertise to balance an investment portfolio. Therefore, this strategy is quite suitable for investors who have jobs or activities other than investing. Unless you hire the services of an investment manager or other team of experts.