Investment Ideas

What Are Investment Ideas?

Investment ideas are specific views, plans, or insights on ways to invest money effectively. Investment ideas typically involve the expertise and advice of an investment advisor who recommends different investments based on individual circumstances. Professional portfolio managers also build targeted investment portfolios around investment strategies and ideas that target a specific style.

Understanding Investment Ideas

Investment ideas and investing strategies form the basis for investing decisions. Individual investors often look to professional financial advisors for services that help to build short-term and long-term investing plans. Financial advisors can use a range of tools to analyze and develop investment strategies for investors. These plans are often based on asset class risk and modern portfolio theory. Comprehensive investment plans can also integrate the use of managed funds that are based around targeted investment ideas managed to a specific strategy.

Types of Investment Ideas

Modern Portfolio Theory

Modern portfolio theory can help to build a framework for individual investment plans. Modern portfolio theory suggests that investors can build an optimized portfolio that provides for diversification and risk tolerance. By basing allocations from the recommendations of the capital market line, investors can skew their allocations using individual securities or funds to match their risk tolerance, which may be conservative, moderate, or aggressive.

Asset Class Risk

Asset class investing can help investors fill out their portfolios using a bottom-up foundation for the development of investment ideas. Generally, asset classes are associated with certain risk levels that help in investing and portfolio construction. Conservative investors or investors approaching retirement tend to choose higher allocations of credit investments with lower risk, while more aggressive investors seek out portfolios with higher risk through higher equity allocations. Once a risk profile and breakdown of investment categories are identified, investors will find a range of investment ideas and product options to choose from. Often this type of investing is focused on finding investment ideas that fit certain style specifications.

Style Investing

Style investing can be an important part of building out a diversified portfolio. Conservative investments may include product styles focused on money market funds, loan products, high yield corporate bonds, high-quality corporate bonds, and government bond investing. More aggressive equity investments may include growth stocks, value stocks, income stocks, or funds managed with a specific market capitalization focus. Investment managers can use both quantitative and qualitative techniques to generate investment ideas and investing strategies for their portfolios.

In some cases, investors may also choose a balanced fund with an asset allocation strategy matching their recommended profile. Balanced funds can take the place of identifying individual holdings by managing a comprehensive portfolio strategy allocated to multiple asset classes.