There are various definitions that are offered to investment strategy, and these are aligned to the understanding of various economists and financial specialist who have sufficient knowledge regarding the aspect of investment. From the argument drawn from some economists, investment strategy can be a set of rules and procedures that are specifically devised to help investors have better understanding of the investment portfolio before making a long-term investment. It is a plan of attack that investors embrace so as to guide them in making investment decisions. The plan is based on personal goals, future needs for capital and risk tolerance. It is the obligation of investors to understand the risks associated with the investment activities that they undertake, and more importantly, the measures that they can undertake to minimize the risks, and at the same time maximizing the returns that are drawn from the investments. A comprehensive investment strategy is composed of asset allocation, risk guidelines as well as buys and sells guidelines. As such, an investment strategy is a trade-off between returns and risk.
Research has indicated that many investors prefer investing in risky assets while others prefer to minimize risks. A number of investors prefer investing in between high and low risk investments. According to a research by Stanyer, many investors believe in low risk and high return; the outcome is always buy-high, sell-low strategy. These strategies differ greatly from rapid growth strategies that focus on capital appreciation, to safety strategy whose focus is wealth protection. The important thing is that every investment strategy is aligned to the investor’s goals and is monitored closely by the investor. With the understanding that most investors aim at maximizing the returns without considering the risks associated with the investment activities that they participate in, one can argue that many of them fail to balance between the negative outcomes of the business activities and the anticipated gains following successful completion of the investment process. It is therefore essential for the investors and other business merchants to investigate passive investment strategies which involve reduction of the operational costs such as transaction costs and active costs, and also realize the impacts of long-term investment strategies which are usually based on equity markets. Generally, it is considered to be the obligation of the financial advisors and consultant to consider issues that attribute to investment strategies before advising and offering financial plans to investors, as this is the only solution of helping investors make wise decisions regarding their financial management and investment plans.