An investment strategy is a protocol and methodology for allocating funds of a portfolio. This strategy is based on an investor’s risk profile. The more risk the investor is willing to take on, the greater the potential returns—but also the higher the risk of a loss in capital.
There is a whole universe of investment strategies, from the least risky being Treasury bills and government bonds with high credit ratings, to the more risky buying of stocks based on fundamental analysis, technical analysis, or simply buying and holding for the long-term. Some investors also look to stocks with dividends that return a yield over time to mitigate some of the risks of the stock market.
An investor’s investment strategy typically has to adapt over time because capital markets and sentiment change perpetually. In recent years, a buy-and-hold investment strategy has worked well, especially among large-cap, dividend-paying stocks. This strategy should continue to work near-term.