Investment Strategies: Build, Test, and Automate Yours
Learn investment strategies that fit your goals and risk. Build a documented plan, backtest your rules, and automate execution to stay disciplined over the long term.
Table of contents
- Why people search for investment strategies
- What is an investment strategy
- Core investment strategies you can use today
- From idea to rules: step by step guidance
- Concrete examples you can copy, test, and automate
- Benefits and considerations
- Related articles
- Conclusion: your next steps
- FAQ on investment strategies
Why people search for investment strategies
You do not need more hot stock tips. You need a clear plan that fits your goals, your tolerance for risk, and your timeline. That is why thousands of investors search for investment strategies every month. They want to replace uncertainty with structure, remove emotion from decisions, and make consistent progress toward long term outcomes. The right investment strategy gives you a repeatable process for choosing assets, sizing positions, managing risk, and staying disciplined through good and bad markets.
This guide walks you through what investment strategies really are, how they differ, and how to build one that suits you. You will also see how to validate your strategy with backtests and automate it so your rules are executed in real time. If you are just getting started, you may also like our primer on investing basics in How to Invest: A Practical Guide to Start and Succeed.
What is an investment strategy
An investment strategy is a documented set of rules that governs how you allocate capital, select assets, manage risk, and execute trades or rebalancing through time. It defines your target outcomes and the path to get there. A robust strategy covers four pillars: objectives like growth or income, constraints like risk limits and liquidity needs, a repeatable decision framework for entries and exits, and a clear execution and monitoring plan.
Good investment strategies are specific and testable. They tell you what to buy, when to buy it, how much to buy, what to do if markets move against you, and when to take profit or rebalance. They also define the risk and return profile you should expect so you can stick with the process through inevitable drawdowns.
To ground the concept in research, many asset allocation strategies draw on ideas from Modern Portfolio Theory, which explores diversification across assets to improve risk adjusted returns. Learn more in this overview of Modern Portfolio Theory.
Core investment strategies you can use today
Strategic asset allocation and diversification
Strategic asset allocation is the foundation for most portfolios. You set long term target weights for major asset classes like stocks, bonds, and cash, based on your goals and risk tolerance. You then hold low cost, diversified exposures to each asset and periodically rebalance back to target.
This approach relies on two powerful ideas. First, diversified assets do not move in lockstep, which can smooth the ride when markets get rough. Second, rebalancing forces you to sell a bit of what has outperformed and buy a bit of what has lagged, which systematically buys low and sells high without guesswork.
You can make strategic allocation as simple or as nuanced as you like. A classic 60 percent stocks and 40 percent bonds allocation works for many risk profiles. More advanced investors may tilt toward small cap or value stocks, add international diversification, or experiment with risk parity. Risk parity tries to allocate based on risk contributions rather than dollars, so each sleeve contributes a similar share of overall volatility. This concept often uses volatility scaling and can be researched further through the literature on portfolio risk budgeting.
Strategic allocation tends to be tax efficient and low maintenance, which makes it well suited for busy investors. The main trade off is that you accept market cycles as they come. You will not sidestep major drawdowns, but you also will not miss most of the long term equity risk premium.
Active selection and factor investing
Active selection seeks to outperform a broad benchmark by picking securities or tilting the portfolio toward rewarded characteristics known as factors. Factors like value, quality, momentum, size, and low volatility have been studied extensively. For a concise primer, see this introduction to factor investing.
You can implement factor investing with individual stocks if you have the time and skill to screen and analyze companies. A more practical route for many is to use factor ETFs that do the heavy lifting for you. For example, you might complement a core index fund with a value ETF and a quality ETF to create a diversified mix of styles. For sector ideas within a growing theme, explore our guide on AI stocks and how to invest in the AI boom.
If you go active, you need to accept tracking error relative to a broad benchmark. Your portfolio will not always move with the market. That is the point, but it can be uncomfortable during periods when your chosen factors underperform. To stay disciplined, define how much active risk you are willing to take and anchor your process to objective metrics like earnings quality, valuation ratios, or price momentum rather than narratives.
Tactical allocation and trend following
Tactical strategies adjust exposures based on signals about the current market environment. Trend following is a popular and well researched approach. The idea is simple. When an asset is in an uptrend, you hold it. When it falls below a moving average or breaks down, you cut or reduce exposure. Over time, trend rules aim to participate in large uptrends and sidestep deep and persistent downtrends. Learn more about trend following.
Tactical approaches can also use breadth indicators, volatility regimes, macroeconomic data, or market internals. Some traders use technical indicators like RSI or MACD to refine entries and exits. If you need a quick primer, see these neutral resources: RSI overview and MACD overview. For a broader trading toolkit, review Trading in 2025: Strategies, Tools and Day Trading Guide.
Income, cash flow, and smarter rebalancing
If your objective is predictable cash flow, income oriented strategies focus on dividends, bond coupons, and systematic distributions. You might build a bond ladder to align maturities with future spending needs, or allocate to dividend growth stocks and REITs for rising income streams.
Dollar cost averaging is another foundational tactic that smooths the timing of your contributions. By investing a fixed amount at regular intervals, you buy more shares when prices are low and fewer when they are high. This can reduce the emotional burden of trying to pick perfect entry points. Read more about dollar cost averaging.
Rebalancing is the quiet workhorse that keeps your strategy on track. Decide whether you will rebalance on a schedule or when allocations drift beyond set bands. Many investors blend both, for example quarterly checks with tolerance bands of 5 to 10 percent. You can also make rebalancing more intelligent by using volatility or drawdown triggers, which increases resilience without creating constant churn.
From idea to rules: step by step guidance
Turning an idea into a working strategy is a process. Here is a practical way to get it done from objectives to automation.
- Clarify objectives and constraints. Write down your target outcomes like growth, income, or capital preservation. Note your time horizon, risk tolerance, liquidity needs, and any restrictions such as ESG. If you expect to add cash regularly, include that too.
- Define your asset universe. Decide which assets you are willing to own. For most investors, broad stock and bond funds are a solid core. Add commodities, real estate, or crypto only if they fit your goals and risk profile.
- Choose decision rules. For strategic allocation, define target weights and rebalancing rules. For factor or tactical strategies, specify entry and exit conditions that are objective and testable. Example: own an ETF when price is above the 200 day moving average and stay in cash when below.
- Set risk controls. Decide how large positions can be, where stop losses or trailing stops apply, and how you will limit portfolio level drawdowns. Use position sizing based on volatility, maximum exposure limits, and portfolio wide loss thresholds.
- Backtest and iterate. Test the rules on historical data to understand how the strategy behaves across environments. Track return, volatility, maximum drawdown, and Sharpe ratio. Quick references: Sharpe ratio and maximum drawdown.
- Automate execution and monitoring. Once you are confident, put the rules to work with automation so you do not miss signals or let emotions interfere.
Obside is a financial automation platform that lets you describe your rules in plain language and instantly turn them into alerts, orders, and full strategies. It won the Innovation Prize 2024 at the Paris Trading Expo and is supported by Microsoft for Startups. Explore the platform at beta.obside.com and create an account at beta.obside.com/register.
Concrete examples you can copy, test, and automate
To make the process tangible, here are strategy examples and how you could implement them with simple rules.
Classic strategic portfolio
Allocate 60 percent to a global equity ETF and 40 percent to an aggregate bond ETF. Rebalance quarterly if any sleeve drifts more than 7 percent from target. Add a cash buffer of six months of expenses for safety. This is simple to test, easy to run, and historically resilient across many regimes.
Value plus quality tilt
Keep a 70 percent core allocation to a broad equity index. Add 15 percent to a value factor ETF and 15 percent to a quality factor ETF. Rebalance semiannually. The tilt aims to harvest long term factor premia while keeping most of the portfolio in the core. Expect periods of underperformance when growth stocks dominate, but better downside behavior in other regimes.
Moving average trend rule
Hold a diversified equity ETF when its daily close is above the 200 day moving average. Move to short term Treasury bills when it closes below. Add a 2 percent trailing stop on entries to control sudden breakdowns, and re enter only after two consecutive closes back above the average to reduce whipsaw.
Income and rebalancing schedule
Allocate 50 percent to dividend growth stocks, 30 percent to investment grade bonds, and 20 percent to REITs. Distribute 3 percent of the portfolio per year, paid quarterly. Rebalance annually or if any sleeve drifts by more than 10 percent.
Event driven and rules based
If your thesis depends on news or macro events, define triggers that are specific and measurable. For example, reduce equity exposure if a defined volatility index spikes above a threshold, or increase energy exposure when a hurricane triggers supply risks in oil.
With Obside, these ideas move from concept to execution in minutes. Ask Obside Copilot in plain language to:
- Alert you if a stock moves above its 200 day moving average and daily volume is two times the 30 day average.
- Rebalance your 60 or 40 portfolio back to targets on the first Monday of each quarter or when drift exceeds 7 percent.
- Buy a fixed dollar amount of Bitcoin every Monday at 10:00 AM as a dollar cost averaging plan.
- Cut total exposure by 20 percent if the S&P 500 drops by 10 percent in a day and restore it when it recovers by 5 percent.
- Notify you if RSI crosses 70 and MACD turns bearish on a currency pair, then reduce the position by a set percentage.
Because Obside supports alerts on prices, indicators, news, and macroeconomic data, you can create rules like sell part of a semiconductor ETF if new tariffs are announced or buy oil if a hurricane hits the Gulf of Mexico and refinery outages rise. Validate your logic in seconds with backtests, then connect your broker so Obside manages execution according to your instructions. If currencies interest you, our Forex Trading Guide can help with market structure.
Benefits and considerations of a well defined investment strategy
The biggest benefit of a defined strategy is discipline. When the market gets messy, you do not have to improvise. Your plan tells you what to do and when. That improves consistency, helps manage stress, and reduces costly behavioral mistakes like chasing performance or panic selling.
Second, a strategy brings measurement. You can track returns, risk, and drawdowns relative to your goals, and improve your rules over time. Without defined rules, it is impossible to know whether a decision was good or just lucky. With rules, you learn and adapt.
Third, automation aligns your everyday behavior with your long term goals. If your rules require you to act at odd hours or across many assets, manual execution becomes a burden. Automated alerts and orders keep your plan on track without constant monitoring.
- Clear rules that reduce emotional decisions
- Consistent rebalancing and risk controls
- Faster feedback through backtesting
- Hands off execution with automation
There are important considerations. Every strategy will face periods of underperformance. Factor tilts can lag for years. Trend following can grind through whipsaw. Strategic allocation can suffer during long bear markets. The key is to pick a strategy whose weaknesses you can live with and that you understand well enough to stick with.
You should also consider costs and frictions. Trading frequently can add spreads and slippage. Complex strategies can be hard to monitor. Backtests can look better than live results due to data mining and hindsight bias. The way to mitigate these risks is to keep rules simple, use realistic assumptions, and validate across different time periods and assets.
Finally, tailor your strategy to your real life. If you have irregular income, a rigid schedule of contributions may not fit. If you are easily stressed by volatility, keep a larger cash buffer and lower equity exposure. The best investment strategy is the one you can execute faithfully for years.
Related articles
- How to Invest: A Practical Guide to Start and Succeed
- Forex Trading Guide: How the Currency Market Works
- Trading in 2025: Strategies, Tools and Day Trading Guide
- AI Stocks: How to Invest and Profit from the AI Boom
- Best Stocks to Buy Now: A Practical Investor Guide
Conclusion: your next steps
If you are serious about improving your results, pick one of the strategies highlighted above and write down the exact rules. Backtest it to understand how it behaves. Start with small allocations and get comfortable with the process. Then automate your execution so you are not dependent on memory or mood.
Obside can help you get there quickly. Describe your idea to Obside Copilot in plain language, test it in seconds, and connect your broker to run it automatically. Whether you need simple alerts or a full portfolio strategy with risk controls, moving from idea to execution has never been easier.
Ready to try it now with no code and fast backtests? Create your account on the platform and start building automated strategies in minutes.
FAQ on investment strategies
What are the best investment strategies for beginners?
Start with a simple strategic asset allocation that matches your risk tolerance, like a diversified stock and bond mix using low cost index funds. Add dollar cost averaging to smooth timing and set a clear rebalancing rule, for example quarterly checks with tolerance bands. As you gain confidence, consider small tilts to factors like value or quality. Keep the process simple and consistent so you can stick with it.
How do I choose the right investment strategy for my goals?
Work backward from your goals and constraints. Define your time horizon, required return, and your comfort with drawdowns. If you need income, lean toward dividend growth and bonds. If you are pursuing long term growth and can handle volatility, prioritize equities and consider small factor tilts. If market declines cause stress, add trend following or higher bond allocations to reduce drawdown depth. Test your ideas and choose the profile you can live with.
What is the difference between strategic and tactical investment strategies?
Strategic strategies set long term target allocations and rebalance periodically. They are designed to capture broad market returns and benefit from diversification without frequent changes. Tactical strategies adjust exposures based on signals like trends, valuations, or macro data, with the goal of improving returns or reducing risk through time. Tactical methods are more responsive but can suffer from whipsaw and higher trading costs.
How often should I rebalance my portfolio?
There is no single best answer. Many investors rebalance on a schedule like quarterly or semiannually, combined with tolerance bands to avoid unnecessary trades. You can also trigger rebalancing when drift exceeds a set percentage or when volatility changes materially. Focus on a rule you can follow reliably and that does not create excessive turnover.
How can I automate my investment strategy without coding?
Use a no code automation platform like Obside. You can describe your rules in natural language, for example buy 50 dollars of Bitcoin every Monday at 10:00 AM or alert me if RSI crosses 70 on EUR or USD and MACD turns bearish. Obside translates that into live alerts, orders, and full portfolio logic, backed by fast backtesting so you can validate before you deploy.
Do I need to learn technical indicators to have a good strategy?
Not necessarily. Many successful strategies rely on simple allocation and rebalancing. Technical indicators like moving averages, RSI, and MACD can help with timing and risk management, but they are optional. The key is to have clear, testable rules that fit your goals and temperament.
What metrics should I use to evaluate a strategy?
Look at return, volatility, maximum drawdown, and risk adjusted measures like the Sharpe ratio. Study performance across different market regimes and stress periods. Make sure your assumptions about costs and slippage are realistic. A strategy with slightly lower returns but smaller drawdowns may be easier to stick with, which can lead to better long term results.
Written by Thibaud Sultan.