Different investment portfolios require different sought of investment strategies in order to mitigate risk against return. However, in the broader sense the investment strategies are outlined into three major divisions:
- the passive investment strategies
- portfolio does not react to changes in expectations.
- comprises the investment strategies of indexing and strict buy and hold.
- the active investment strategies.
- based on responding to changing expectations.
- establishing a benchmark or comparison portfolio used to evaluate the performance.
- the semi active investment strategies.
- makes very controlled use of changes in exceptional data.
The investment strategies would determine the asset allocation decision of portfolios to be invested either for proprietary trading, hedging (a way of investment protecting from loss thru risk management products such as forward, futures and option), arbitrage (means the practice of buying in one place and selling in another place where the price is higher) etc.
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