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Created on 11.09.2019

Define and implement your investment strategy properly

Investors have varying needs. Some might want security, whereas others might want to get the highest possible returns. A smart investment strategy should meet your own individual requirements. It will form the basis and act as a compass for all your investment decisions. To help you make the right decisions, we have summarized the main things you need to know.

These three factors will determine your investor profile

Before you decide on an investment strategy, you need to establish your investor profile. This describes your options, preferences and plans as an investor. Risk capacity, risk appetite and investment horizon are crucial aspects of an investment profile. You can find more information about investment profiles in the article “What is an investment recommendation?”.

These are the foundations that will determine what your strategy should be in relation to risk. Investor profiles can be categorized in many ways, including cautious, balanced and risk-taking. 

How to define and implement your investment strategy

The right strategy will depend on how much risk you can and wish to assume. But remember: don’t put all your eggs in one basket. To invest money successfully, you need to diversify your assets broadly. The risk should be spread across as many different investments as possible. This is easier if you purchase units in different funds. There is one strategy that has proved particularly effective and that suits many investors: the “core/satellite-strategy”

The core/satellite strategy: set your own priorities

The core/satellite strategy involves defining the majority of your investment assets as core capital. This helps map your basic strategy, and ensures you pursue this strategy consistently with around 80% of your investment capital. The core investment approach will help reduce your risk as a broadly diversified asset allocation fund will usually act as your core investment. This is a mixed fund that comes with either a higher or lower equity component depending on your risk/return requirements.

The remaining 20% of your investment capital forms “satellites”. You can use these satellites to invest in areas that interest you, and you can set your very own priorities. For instance, if you feel modern technologies such as artificial intelligence or smart cities have a great deal of potential, you can invest the satellites in your portfolio specifically in a suitable thematic fund. You also have the option of investing some of your capital in sustainable projects or specific regions of the world. PostFinance offers a variety of funds, including nine of its own and around forty third-party funds.

Shares and bonds from newer, less established sectors tend to entail a greater level of risk. That said, you can also use your satellite investments to limit your risk as well, which could involve optimizing your diversification with an investment in real estate.

All in all, the core/satellite approach can help you reduce your overall risk if you continue investing the majority of your assets, i.e. your core capital, in the wider market, whilst you use your satellites to invest in areas that interest you personally. This means you can factor your own thoughts into your investments without entering into any cluster risks that could jeopardize your total assets.

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