types of investment strategies

Types of Investment Strategies

Here, we discuss some common investment strategies which can be easily used at an individual level. Now, note that this is the theory part, which will guide and help you to make financial decisions. The actual decision will, of course, be solely yours.

The first three words of the investing discipline are, think, calculate and conclude. All in rationality of course and not in mere speculation, a thought should be based on figures. There are countless investment strategies, classifications and theories propounded by God knows how many people. However, let me tell you that not one of them is completely foolproof. You own logic and the strategies which you create on your own, are the ones that work the best and also help you to get the best investments. The key to make money through investing, through the stock markets for instance is to pour in your own logic into the a, b, c's of investing, which are of course: think, calculate and conclude. The following are some of the commonly accepted and used strategies. Now throughout the article we shall be focusing entirely on strategies. Your vehicle can be potentially any investment channel. Some pointers include, mutual funds, shares or stocks, equity and traded instruments such as trade-able bonds and debentures, life insurance, Systemic Investment Plan, Collective Investment Schemes, gold, silver, derivatives and even debt instruments. Potentially, anything and everything (legal) under the Sun, not necessarily on this earth. Performance-based Investment Strategies The following are the types of investment strategies which are based on the performance of the investment destination into which your money has been poured in.
  • Growth Investing: Growth investing is a strategy where investors aim at getting the maximum Rate of Return and the Return on Investment in minimum time. In case of growth investing, investing is done into aggressively progressing companies such as Google. The channels with the help of which you can invest into aggressively growing companies or destinations include, growth mutual funds, variable annuities, stocks, real estate in some cases, gold and silver. Apart from that Systemic Investment Plans (SIP) and Collective Investment Schemes (CIS) are ever available options. For investing into stock and money markets, green chip companies, software and electronic companies, bio-industries and pharma industries are showing quite an aggressive growth. For more risky deals you may go in for auto and crude oil sector. Even more riskier are the currency and commodity markets (highly speculative).
  • Income Investing: Income oriented investing is usually used to invest into conservative channels, which pay consistent returns, which are not very high but tend to have a consistent rate of return over a certain time period. Income investing is done into channels which provide a fixed and assured return on investment. Fixed annuities, some life insurances, mutual funds, SIP's and CIS's which have a fixed return payment policies and most of the other mutual funds with balanced portfolio characteristics are good income oriented channels of investments. On the stock and money market side, you can also trust Blue-chip companies, food and consumer product companies, agro and pharma companies. They have quite a good stock rate and fantastic trend of dividend payment.
  • Value Investing: Value investing is usually the most difficult of the three, not to mention the riskiest. In such a situation investors focus their attention on channels which currently have small values but are bound to increase in the near future. This often tends to be quite a risky bargain. The sheer trust on this logic is the investor's driving force. Common channels include, mutual funds, which have portfolios which are controllable by the investors, unknown or rarely invested in shares or stocks, gold, silver and even real estates. Complex channels include bonds, instruments and debentures issues by companies. Basically, a value investing is done with aim of having a rag to riches story. Often the investor simply chooses to invest because his logic tells him that it's a great business or profit-making opportunity.
Now these are the random and almost universally applicable strategies which can be implemented through any kind of investment vehicle, channel or source. The best way is to have a superseding policy or strategy of investment. Invest 25% of the investment money available with the help of the aforementioned strategies. The 25% that is left behind, put it into a bank account for safe keeping, or buy some insurance such as medical insurance and auto insurance from 10% of it and put the remaining 15% in a bank. Other Investment Strategies There are some other investment strategies which have become quite popular over time, take a look.
  • Buy and Sell: Buy and sell is an investment strategy where the small rise in the value of stock can be put to use. In this strategy the investor purchases the stock and sells it as soon as possible at best possible price rise. When the buy and sell is done within one day, the transaction is known as intraday and when the buy and sell of several units is done rapidly, then that it is known as arbitrage. This strategy is also used for gold, silver, exchange traded funds and other trade-able instruments such as bonds and debentures.
  • Buy and Hold: The second type of strategy which is the exact opposite of buy and sell, is the buy and hold one. The buy and hold strategy works as the name suggests, the stock is brought and held for a long time period to profit from dividends and the long term stock price rise. Then after a considerable time period, the stock is sold off bringing in a small fortune.
  • Pile Away: In some cases, people tend to utilize only annuities, SIPs, Mutual funds, CIS's and such other plans and schemes to achieve the best return on investment with the help of a relatively low investment, with almost zero effort from the investor. The total return received is often a small fortune.
  • CAN SLIM: This strategy is a great one and it involves the analysis of the following facts about a company or a sector or an investment destination: Current earnings (C), Annual earnings (A), New product or service (N), Supply and demand (S), Leader or laggard? (L), Institutional sponsorship (I) and position on Market indexes (M). Developed by editor William O'Neil of Investor's Business Daily, this strategy or rather technique gives us a comprehensive overview of the investment channel or destination which we are choosing.
It is always better to follow multiple strategies which suit the situation. Apart from that applying the CAN SLIM to everything helps in almost all the cases. Reading the opinions, books and advise of investment and finance experts and thinking, calculating and concluding about almost everything, right from small regional incidences to large international events, hiccups in stock markets tends to help a lot.

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