Building your own investing strategy

An investing strategy is a plan that outlines how you intend to reach your investing goals.

July 14, 2022

Building your own Strategy

What’s an investing strategy?

An investing strategy is a plan that outlines how you intend to reach your investing goals.

An effective investing strategy takes into account your risk tolerance, time horizon, and the amount of time and energy you want to spend managing your investments.

These factors influence which investments you choose to buy, as well as your overall asset allocation.

What’s asset allocation?

Asset allocation is the percentage of each investment type that makes up your portfolio. For example, a sample asset allocation might be 60% stocks, 30% bonds, and 10% cash.

Investors with longer time horizons and/or higher risk tolerance may build their asset allocation with a higher percentage of stocks than bonds or cash.

On the other hand, investors who need their money sooner and/or who have a lower risk tolerance may have a smaller percentage of stocks but more bonds or cash.

The goal is to have an asset allocation with the right amount of risk and reward so that you’re comfortable with how it performs when the market is up and when it’s down.

Choosing investments

As you’re choosing investments, consider investing in things that respond differently when there’s a shift in market conditions—like stocks and bonds.

What’s a bond?

A bond is like an I.O.U. between a lender and a borrower. You (as the investor) are the lender, lending your money.

And a government or corporation is the borrower—using your money to fund their projects for a set period of time. Typically, every 6 months you receive an interest payment as a “thank you” for letting them borrow your money. Once that loan matures, you’re paid back in full.

Stocks vs bonds

Historically, bonds have usually had lower potential for growth than stocks, but they also have relatively lower risk than stocks. Stocks and bonds also respond differently to economic trends—sometimes when one is going up, the other may be going down (and vice versa).

Having some percentage of both stocks and bonds in your asset allocation could help you manage risk.

Consider this: While Plynk does not offer individual bonds to invest directly in, it does offer “Foundational Funds” as an option on the Discover page of the app.

Foundational Funds are mutual funds that have various asset allocations already set up—with different ranges of stocks, bonds, and cash in each.

Some investors like this approach so they don’t have to build their own asset allocation.