There are investment strategies which should be made before actually getting into investment. The investment is made according to some of the major goals and aims which the investor is trying to achieve in the trading process.
Period of investment
An investment can be for a short term or for a long term period. It would depend on what the investor is trying to achieve and what his comfort level is with the period of investment.
Age of the customer
The age of the customer would decide what would be the risk appetite of the investor. A young man with many years of working life ahead of him would not be averse to risk. A man nearing retirement would like to invest in stocks which are safe and have a low risk.
Investment in a certain sector
There are many investors who like to invest in a particular sector because they have greater understanding of the sector and they understand the kind of forces which influence the sector. It is the aim of the customer which finally helps him in planning his investments.
There are a few major strategies of investment
- Active and Passive investment strategy
A passive strategy is an investment strategy in which the investment is made in the index rather than buying individual stocks and shares. The investment in stocks would need buying and selling of shares multiple times. However in index investing the trader invests in a benchmark of the index and stays invested in it for a long period of time. This kind of investment is broad based in nature. The long term result of index investment is much better than individual stock investment.
Active investment is a condition in which there is a continuous buying and selling of stocks by a trader according to the conditions of the market and according to the prevailing condition and sentiments in the share market. While the active investor is looking for investment options, right entry and exit time to make profits. A passive investor looks for long term investment and does not time the market aggressively. An active investor is usually a short term investment and he is always looking for ways and means to mitigate the risk and protect his investment while making profit.
- Growing investment strategy
Investment in stocks by traders to protect the basic fund of the investor and increase the invested capital. Under this strategy the investment is done in small cap companies which have good growth potential and the investment grows in a limited time frame. These are high risk investments. However, in the right kind of market condition they tend to over perform and pay high premiums to the investors. Growth investment needs to be research oriented as the investment is on young companies and not much data is available and the investor needs to keep an eye on the overall performance of the sector and how it is positioned for the future.
- Value investment
Value investment is the strategy in which a trader tends to pick up shares which are undervalued and are currently trading at less than the book value. Market sentiments keep rippling into the market which might result in favour of a few stocks and might hit a few stocks adversely. The overall fundamentals of the company and its history is not taken into account by the trader while investing. A speculator looks carefully for shares who are trading below book value and have a strong background and are positioned for future. These are shares on sale. The traders carefully handpicks such shares and invests in tem for future profits.
- Income investment
Many a time’s investment is done to generate cash from the currently invested portfolio. It can be in the form of dividend earned from stocks or from the investment in bonds which earns interest over a period of time. Usually these are investors who are looking for a steady source of income from the invested money. The four major kinds of income by investing in stocks and company bonds are
- Capital gain/losses
All investors have their own peculiar style of investment in which they invest according to their preference of the sector, their age group, the preferred investment period and liking. To understand the different strategies and to know which suits you the best you would need a guide to walk you through the entire passage of investing styles. According to your age group then you can decide a style and make your preferred choice. Share market profile enrols student and young traders to make them proficient at investment in the stock market. Understanding sectors, analysing stocks and their peculiar behaviour with changing sentiments needs to be understood before actually pooling your money in the stock market and making an investment. Share market profile has various courses which are running online and a person can enrol and learn the art of investment. To know more about the courses Visit our website