Investing strategy

I’m blogging about my experience trying out new ways to invest and all of my experiments.

What I think I’ve missed from my topics is to actually tell you about my investing strategy.

In the evaluation criteria, when I’m looking to invest I usually look at 3 different factors:

  1. the return on investment
  2. the amount of work involved
  3. the risk

The rule of thumb is that a higher risk means a higher return and that works fine most of the time, just be aware that there are exceptions.
Same thing goes with the saying that you should have passive investments… even investing in an index fund isn’t 100% passive.

Risk assessment

I consider myself in the first years of investments, I don’t have a lot of capital to lose and that’s why I decided to take riskier investments with higher returns.
I know that at this stage if I end up badly and I end up losing all my capital, I can always go back to a full-time job that has a decent pay. So, in my situation, I consider that the only risk is to be lazy and not do anything.
I hate it when I’m not doing anything because that means that I’m not taking advantage of my surrounding opportunities.

Investing strategy

investing strategy in 3 steps
I created this chart just for you, this is a way to visualize your investments.
Consider that this chart represents your net-worth, and think of the 3 zones inside the chart as different investments.

  1. The first zone represents new investments where you don’t have experience.
    • You should keep your investments low because the potential here is to lose it all
    • The investment should be low enough to be able to sleep at night without a problem. It’s more of a psychological¬†low than a¬†net-worth low.
  2. The second zone is for investments which you tested for a period of time that have been in the first zone
    • You can invest in this area additional capital
    • Don’t go overboard, don’t invest more than 33% of your capital yet
  3. The third zone is for investments where you have experience and this investment passed the test of time
    • At least 6 months experience, but even this could be considered low enough
    • Your strategy is consistent here and you had consistent returns

Grey zone

You can see that I left one area marked and without a number. Never forget, always keep some money in your pocket or in the bank.
Always keep in mind, that even if you mess things up, that’s not going to be a problem because you will have more experience and a backup to get back on your feet.
In the financial crisis, people lost because they were over-leveraged and they weren’t able to pay their debts.

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