Investment Strategy refers to a planned approach or method used by an investor to determine how to allocate assets within a portfolio to achieve specific financial goals. It encompasses the principles and guidelines that govern investment decisions, including the types of investments to include (such as stocks, bonds, real estate, or commodities), the risk tolerance level of the investor, the time horizon for investments, and market conditions.
Investment strategies can vary widely, including approaches such as value investing, growth investing, income investing, index investing, or active trading. The strategy may also involve tactical asset allocation, where the investor adjusts their portfolio based on market conditions, or strategic asset allocation, which maintains a consistent allocation over time regardless of market fluctuations.
A well-defined investment strategy helps investors remain disciplined, make informed decisions, and work towards financial objectives, such as capital appreciation, income generation, or wealth preservation. It plays a critical role in managing risk and optimizing returns in the dynamic financial markets.