What is the best investment strategy?
Dr. Mojtaba Lashkar Baloki
The right ways to invest
An investment strategy includes a set of choices and rules that determine the composition of our investment portfolio, as well as how to manage and keep the portfolio up to date. In other words, it answers three questions:
What asset classes should my investment portfolio include?
What percentage of the portfolio does each asset class make up? (Weight of assets, for example, gold 30%)
How (based on what rules) and when should I review and rearrange this asset portfolio?
We have a variety of investment strategies. One of them is copy trading. What does copy trading strategy mean?
If you know a person that you have 100% confidence in him and his decisions, you will follow him and copy everything he buys and sells. Today he buys gold, you also buy gold. Tomorrow, the average will decrease in the capital market, you will do the same.
In the world, based on this logic, social tradings have been formed. The ability to copy other users is one of the important features of social trading platforms. When you find a successful trader with the right trading style, you can choose to follow his strategies so that all the trades he makes are automatically copied to your account. Similar to this logic in Iran, there are hundreds of analyzes on the website.
What are the benefits of this strategy?
• Low cost to analyze and collect information
Very little time and energy for analysis
• A controlled sense of losses at the time of loss because you know that a professional person has also lost.
What are the weaknesses of this strategy?
• We do not always have access to such a professional person.
• The role model may be very professional in a market, for example, gold, but not very successful in the crypto or stock market.
We generally do not have access to the composition of the portfolio of these people, how much they have allocated to gold, how much to real estate and how much to crypto
In the first note, we said that for five reasons, no two people’s investment portfolios are the same, even if they are twins. So copying even if possible leads to optimization of my investment portfolio, not for me but for him (the role model).
To whom is this strategy recommended?
• Those who do not have time or ability to analyze highly.
• Those who have good access to information, transactions and decisions of the role model.
• Those who do not want to spend a lot of time in investing and prefer to spend their time on their main business or life or more important things than investing.
Strategic prescription:
Choose the shoe-to-shoe or copy trading strategy when you want to spend little time and energy on investment matters, you have a suitable professional role model available, and you are sure that your goal, horizon, liquidity and risk tolerance are with the role model. It has similarity and proportionality.
Source: Economics professors
This post is written by nakok1