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Reasons behind changing your investment strategy

23rd June 2020 Print

Financial markets are continuing to change and advance. In the early period of 2020, this was even more the case, as we saw endless markets toppling due to the world-wide situation occurring. That meant a very difficult period for investors, as markets are now slowly increasing again, as economies reopen. This situation however, was certainly one that led to many looking to rethink about their own investment strategy in order to best deal with any situation that could arise within the future.

One of the first reasons is that you may have overestimated your own risk tolerance. This becomes all the more evident in periods like present, when markets completely fall through the floor. The last ten years has seen the longest bull market in history, which has meant that many investors will have fell for over estimating their own investment portfolios. For an example, the S&P 500 has risen by around 330% in its 10+ years. A good way in dealing with this is having less volatile investments, such as bonds, which are normally always less risk than stocks.

This also leads on to investing in emerging markets. A key example of this is Forex, with artificial intelligence likely to play a much greater role, as technology continues to advance. This is shown in statistics that show that 90% of successful Forex traders are now using robots in order to help with their trading, something that is also proving popular across many financial markets. There are numerous forex brokers available, so it is important to check the comparison tool available, whichever stage you are at in your trading career. This will then help you make the correct decision on which would be the best platform to start your Forex investments. Forex has been another market that has proven very popular in the current period of 2020, with the currency markets and interest playing a major role on this. It is also a market that is expected to continue to grow in the coming years.

Another reason behind changing an investment strategy is that your current investments are not diversified enough. This covers making sure your ‘eggs are not all in one basket’ as the saying goes. It means having investments in numerous companies, countries and industries in order to deal with expected drops that may occur in some over time. By having a diversified portfolio you are covering yourself and you will be able to deal with issues that may arise, such as the current situation that has seen many markets fall through the floor in a matter of weeks. You can then cover risk at any level, which is paramount for being successful with your investments in the long term.

A common reason behind why changes are needed to be made in your investment strategy may simply be because you are paying too much in investment fees. This usually occurs when you are paying an investment advisor to help you pick stocks, bonds or mutual funds. In some cases, investors can be paying steep fees for this service, while not getting the expected return.

This also finally draws onto the point around retirement and investments, when you have money you can ‘afford not’ to spend. It is recommended that if you are investing in retirements then you should have at the very least, five years’ worth of living expenses in cash. That means that you are able to deal with the anticipated drops for prolonged periods, without having to draw on any investments in order to deal with other loses. A key example maybe a market crash or a pandemic, such as the current situation, which has seen markets drop by record numbers and some may never recover to the level they were at previous.

These are all key reasons behind why many people will look to change and update their methods of investments in order to always stay successful within the industry.