Investment strategies and portfolio

Reviews

Advantages

Blog

Leave a request

Overview of the best investment strategies

Home » blog » Overview of the best investment strategies

Investing is not just investing money, but the art of capital growth. To learn this, it is important to understand which investment strategies are most appropriate in each situation and how they can affect future financial success. The path to competent investing requires not only knowledge, but also a thorough analysis of options. In this article, we explore effective investment strategies that really work, as well as the benefits and risks of using them. According to the World Bank, about 50% of all investments made in the past 10 years have been successful if the right approach is followed.

Diversification: what is it?

Investment diversification is the basis of good risk management. It involves spreading capital across different asset classes, reducing the likelihood of large losses. Thus, a crisis in one sector will not have a catastrophic impact on the entire investment portfolio. Diversification involves including assets from different categories, such as stocks, bonds, real estate and gold, which react differently to market changes. According to the Central Bank of the Russian Federation, diversification reduces portfolio risk by 30% compared to investing in a single asset.

how to construct an investment portfolio?

To develop the best investment strategy, it is necessary to ensure a good balance between different asset classes. An example of a good mix:

  1. 40% shares of companies with different capitalisations (e.g. Gazprom and Sberbank shares).
  2. 30% fixed-income bonds for stability (including government bonds from OFZ with a 7% annual return).
  3. 20% real estate as a stable asset to protect against inflation (e.g. commercial real estate in Moscow).
  4. 10% gold as a protection against economic instability (including bullion or investments via ETFs).

Advantages and disadvantages

Diversification has advantages and limitations. On the one hand, it reduces risk, but on the other, it also has the potential to generate quick returns. In 2008, when many investors lost a lot of money due to the crisis, diversified portfolios proved their resilience, losing on average 20% less than non-diversified investments. However, excessive asset fragmentation can also make it difficult to achieve high returns, as a highly diversified portfolio rarely reaches peak growth levels.

Long-term investment strategies

The best long-term investment strategies are based on calmness and patience. It is an approach for those who want to maximise the growth of their capital without worrying about daily market fluctuations. Long-term investors tend to invest in assets that will show steady growth over decades. Examples of this type of investment are the shares of major technology companies such as Apple and Microsoft, which have increased in value by more than 1000% over the past 20 years.

Gold and real estate as assets

Gold and real estate are classic assets for long-term investments. Gold, for example, has increased in value by more than 400% over the past 20 years, making it an attractive tool for capital protection. Property is also a reliable way to preserve capital and generate a stable income. According to Rosreestr, property prices in Russia have risen by an average of 8% a year in recent years, making property investment a lucrative long-term option. It is also important to consider taxes: the tax on income from the sale of real estate is 13% if the property has been owned for less than 5 years.

Benefits of stability

Investing in gold and real estate offers not only stability, but also protection against inflation. For example, an investment in residential property can generate passive income in the form of rental income. The average rental yield is 4-6% per year, depending on the region and type of property. There are many historical examples of successful long-term investments: for example, investors who bought property in Moscow in the early 2000s were able to increase its value more than fivefold by 2020. Rents also rose 300% during this period, providing stable income.

Strategy for investing in start-ups

Investments in start-ups are attractive because of their high returns. The projects offer the chance of super profits not possible with traditional investments. Companies like Google and Facebook, for instance, once attracted early investors with incredible returns. However, it is worth remembering that only one in 10 start-ups is successful and generates high returns for its investors.

how to choose a promising project?

It is important to pay attention to the following

  1. The quality of the team: the experience and professionalism of the founders. Teams formed by professionals with more than 10 years of experience in the industry are much more likely to succeed.
  2. The idea andpotential: the extent to which the product solves an existing problem and whether there is a market for it. For example, start-ups in the renewable energy sector are in high demand because of the global transition to sustainability.
  3. Financial performance: the existence of a monetisation plan and initial successful results. If revenues are generated early on, this is usually a positive sign for a promising start-up.

Conclusion

Choosing the best investment strategies is a task that requires time and analysis. Whether you are diversifying, investing for the long-term or investing in start-ups, it is important to choose an approach that suits your objectives and your risk level. Profitable investment strategies often require a combination of different approaches to achieve stable and high returns. Don’t be afraid to experiment, but always keep investing wisely based on real data and proven methods. For long-term investors, stability and patience are important, but for those willing to take risks, high-yield opportunities such as start-ups can deliver significant returns.

Related posts

How to Evaluate the Effectiveness of an Investment Portfolio: Best Evaluation Methods

Creating a portfolio is only half the battle. The real work begins afterwards. Evaluating the portfolio’s effectiveness is the key to control, analysis, and improvement of results, especially when the goals go beyond simple “buy and wait for growth.”

Why Portfolio Evaluation is Necessary

Without measurements, it is impossible to manage — this statement is relevant in investments as well. Financial assets can behave unstably over time: some grow, others decline, and some show zero dynamics. To preserve and increase capital, it is necessary to track not only profitability but also the level of risk, volatility, alignment with goals, and behavior relative to benchmarks.

Simple profit in percentages will not say anything if the losses incurred are not taken into account. Therefore, a professional approach requires the use of precise indicators and mathematical models.

Main Goals and Analysis Parameters

Before starting calculations, it is important to determine what exactly needs to be measured. Evaluation is carried out based on several criteria:

  • return level in relation to risk;
  • income stability and volatility;
  • deviation from the benchmark;
  • balance of asset classes;
  • compliance with personal risk profiling.

All aspects should be analyzed together. Otherwise, a portfolio may be mistakenly considered successful when it has long deviated from the strategy and goals.

Classic Methods of Evaluating Investment Portfolio Quality

The financial industry has accumulated an arsenal of methods that allow for evaluating portfolio effectiveness:

  • Sharpe Ratio — shows how much profit is generated per unit of risk measured by standard deviation;
  • Sortino Ratio — a refined version of Sharpe, considering only negative fluctuations;
  • Treynor Ratio — relies on market risk measured through the beta coefficient;
  • Jensen’s Alpha — demonstrates the excess return over the expected at a given level of market risk;
  • Benchmark — comparison with a benchmark index, such as S&P 500 or an industry indicator.

Formulas allow breaking down the results, removing emotions, and focusing on numbers.

How to Use Sharpe and Its Analogues

The most popular indicator — the Sharpe Ratio — is used to assess the relationship between profit and risk. The higher the value, the more efficiently the portfolio works at the given volatility. However, Sharpe has a weakness: it considers all deviations, including those related to growth.

Here, the Sortino Ratio comes in handy, excluding positive fluctuations and focusing only on potential downturns. This perspective is considered more logical because investors are concerned about the risk of decline, not growth.

For those analyzing results with a connection to market dynamics, Treynor and Jensen ratios are suitable.

Benchmarks: References for Comparison

Understanding how much a case deviates from a basic reference point helps track efficiency not in a vacuum but in the context of the current situation. Typical benchmarks include stock indices such as S&P 500, MSCI World, or industry indicators.

The choice of benchmark depends on the composition of assets. If the case consists mainly of American stocks, comparing with the S&P 500 would be logical. And if it involves global securities, it’s better to take an index reflecting international markets.

Risk Profiling and Its Role in Strategy Selection

Before evaluating portfolio effectiveness and calculating how well it met expectations, it is necessary to align its behavior with personal goals and an acceptable risk level. This is where risk profiling comes into play — determining the investment temperament: conservative, balanced, or aggressive.

The evaluation is based on surveys, preference analysis, and acceptable capital drawdown. A case compiled without considering these factors may be potentially profitable but psychologically unbearable for the owner.

How Diversification Works in Practice

Allocating assets across classes, regions, and industries reduces portfolio sensitivity to unexpected changes. Diversification specifically helps offset declines in some securities with growth in others.

A well-structured set of investments not only looks better but also weathers crises better. For example, a decrease in stocks can be balanced by the growth of bonds or defensive instruments. The effectiveness of distribution can be checked through the return-to-volatility ratio over a long period.

CAPM Model and Markowitz Theory: Fundamental Approaches

Among the classical portfolio study methods, the Capital Asset Pricing Model (CAPM) stands out. It establishes the relationship between expected return and market risk, helping understand if the result aligns with the commitments taken.

Complementing this is the Markowitz Theory, which underpins modern portfolio theory. It states that for a given return, there is a set of assets with minimal risk. Conversely, to achieve higher returns, an investor must accept higher volatility. The task is to find the perfect balance.

Black-Litterman Theory: Modern View on Evaluation

Many consider the Black-Litterman theory a modern reinterpretation of Markowitz. It integrates investor’s subjective forecasts with market objective data, making the model more flexible and applicable to real conditions where participants’ views may vary significantly.

This approach is useful for cases with alternative assets where standard methods may not work.

Which Tools to Choose in 2025?

Evaluating portfolio effectiveness in 2025 requires a comprehensive approach. Simply looking at the final profit percentage is not enough. It is important to consider diversification, benchmark behavior, risk indicators, and stability.

The most accurate picture is provided by combinations: ratios + comparative analysis + behavioral parameters. This system allows for establishing a monitoring style resistant to emotions and sharp movements. After all, the main goal is not just to earn income but to retain it in the long term!

Read

How to Improve Financial Literacy: Effective Ways

Financial literacy is not just the skill of counting change or saving on discounts. It is a comprehensive model of thinking based on understanding the nature of money, economic laws, risks, and perspectives. How to improve financial literacy: it means to build a path to economic efficiency, personal stability, and capital growth without excessive stress. Personal finances affect the quality of life, health, career, and even relationships. The ability to manage money becomes critical in conditions of inflation, digitalization, and unstable markets.

Financial Literacy: What It Is, Why It Is Needed in Real Life, and How to Improve It

Financial literacy is a practical understanding of income, expenses, assets, liabilities, taxes, savings, and investments. It helps make informed decisions: from choosing a loan to buying a house, from budgeting to protecting savings from inflation. Lack of knowledge leads to impulsive purchases, chronic debts, and depletion of savings. Increasing financial literacy in adulthood significantly reduces anxiety, improves control, and contributes to income growth.

Money Management Strategy: How to Improve Financial Literacy

Any step towards prosperity begins with systematic money management. First, it is worth establishing clear accounting. Tables, mobile apps, paper expense diaries – any tool is suitable if it records every transaction. Then – setting limits. Not more than 25% of the budget on groceries. 10% on entertainment. Up to 35% on mandatory payments. Expenses should follow the principle of “pay yourself first”: 10-20% of income should go towards savings and investments before the rest is spent. This structure, how to improve financial literacy, helps withstand any shocks.

Personal Budget: Foundation of Stability

A budget is not just a table of numbers, but a tool for controlling reality. It shows where money is leaking and how to redirect it towards long-term goals. The monthly plan should consider fixed (rent, food) and variable (gifts, leisure) expenses. At the same time, any unplanned expenses nullify the effectiveness of even the most detailed accounting. To understand how to improve financial literacy, it is important to create not only a monthly but also an annual budget. Include seasonal expenses: insurance, vacation, seasonal clothing, major gifts.

How to Combat Impulse Purchases: Psychology Under Control

Impulse purchases ruin any, even perfectly crafted, personal budget. Marketing affects emotions, creating the illusion of “missed opportunity.” Concrete methods help improve financial literacy:

  1. Implement the 48-hour rule: wait two days before any non-urgent purchase.
  2. Pay only with a debit card with a limit.
  3. Shop from a pre-made list.
  4. Limit visual contact with ads: unsubscribe from newsletters, remove marketplaces from your phone.

Such practices reduce emotional noise and increase discipline. This is conscious expense planning.

Investing for Beginners: Start Without Fear

Investing money means making capital work. It is not gambling or playing the stock market. Clear calculation: how much to invest, in what, for how long, and with what risk. Beginners should start with index funds, where the risk is lower and the return is higher than inflation. On average, index funds yield 6-10% annually.

Next – diversification. You should not invest everything in one company, one industry, or one instrument. Stocks, bonds, gold, real estate, funds – each asset plays its role. How to improve financial literacy: it is important not only to know how to invest but also to understand why. Investments should align with goals: buying a home, education, retirement, emergency fund.

Emergency Fund: Protection Without Panic

An emergency fund is not a deposit for interest, but a guarantee of peace of mind. It is an amount equal to 3-6 months of expenses, available at any time. It is better to keep funds in a separate account, on a card with instant access, or in conservative instruments: government bonds, savings accounts, ISAs. Cases of job loss, illness, force majeure cease to be a catastrophe if such a reserve already exists. This measure sharply increases financial stability and reduces pressure in crisis situations.

How to Save Money: Specific Techniques and Calculations

How to improve financial literacy: it is impossible without the ability to save money without compromising quality of life. Optimization does not mean refusal, it means choice. Effective methods:

  1. Review subscriptions. Cancel all unused services, including paid apps and TV packages.

  2. Plan purchases. Buy groceries once a week from a list – save up to 30% of the budget.

  3. Buy in bulk. Cleaning supplies, canned goods, long-lasting items are more cost-effective when bought in bulk.

  4. Compare prices. Use aggregators, promo codes, and cashback.

  5. Automate utilities. Install meters, switch to off-peak tariffs, insulate housing.

  6. Avoid credit cards. Use only debit cards and real money.

This practice forms a sustainable habit of rational consumption and increases economic efficiency.

Credits, Inflation, Investments: Dealing with Risks

Credit is not an enemy but a tool. It is important to understand its cost. Overpayment on a consumer loan at a rate of 17% reaches 50% of the amount. With a credit card, it is even higher. Inflation devalues savings, especially in traditional deposits. If the deposit rate is 8% and inflation is 12%, the losses are evident. Investments compensate for inflationary erosion. A properly constructed portfolio yields returns higher than price growth, preserving purchasing power. The basic goal of the process, how to improve financial literacy: protect assets and turn savings into capital.

Increasing Financial Literacy in Adulthood: How to Incorporate the Habit into Life

Forming habits in adulthood requires practice and repetition. It is not worth starting with courses. It is more effective to implement simple steps:

  1. Manually track income and expenses.
  2. Set monthly goals and analyze results.
  3. Write a shopping plan in advance.
  4. Open a savings account.
  5. Learn one concept per day: “assets,” “dividends,” “bonds,” “yield.”

This approach does not overload the brain but forms a stable behavior model.

Conclusion

Financial literacy is not a set of knowledge but practice. Not theory but action. It does not come immediately but is formed through consistent efforts: accounting, planning, saving, expense control, and smart investments. Tools on how to improve financial literacy already exist: tables, apps, podcasts, online services. But the main thing is motivation, discipline, and a sober look at your finances. Only in this case wealth is formed, capital grows, and personal financial stability strengthens.

Read

Join us! All you have to do is subscribe!

By leaving an e-mail, you agree to the processing of personal data.