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There are several strategies that help while you make decisions regarding investments. But a strategy that works best for an investor’s goals and risk tolerance is the perfect strategy for him/her. You need to stick to the time-tested basics which are familiar metaphors and last for a long time, especially if your investment goals are long-term. Some of the strategy types are as follows:
1. Fundamental Analysis
Fundamental analysis is one of the most basic investing styles that involves analyzing financial statements of business entities intended to pick quality stocks. It is mainly used for analyzing equity stocks. With financial data available in statements, you can compare the past and the present status of the particular business. You can compare Business thoughts with other businesses in the industry. Your analysis will determine a reasonable valuation of the particular stock and you can decide whether to buy that stock not. P/E ratio of a company is a fundamental data used in online share trading.
2. Income Investing
Income investing focuses on generating income from stocks instead of increasing the value of your portfolio. Investors can earn cash income in the form of dividend through stocks or fixed interest income through bonds. Investors used to earn a steady income from investments. To hold your financial investment in electronic form, you should have a demat account. You can open a demat account online using your PAN.
3. Technical Analysis
Technical Analysis is just opposite of fundamental analysis where investors often use trading charts. Trends and patterns are used here over the valuation measures of a stock. So, fundamental data like P/E ratio is avoided in technical analysis. Technical analysis helps in understanding the price patterns and current market trends. These trends of price patterns help investors to predict future patterns and trends of stocks. These patterns and trends possess indicators about future market movements and investors can make investment decisions based upon these expected patterns or trends. Such analysis is used by day traders mostly Day traders require a fast and reliable trading platform. Bajaj Financial Securities Limited trading account is one of such advanced trading platforms which help you save big on brokerage costs with a flat brokerage rate per trade model.
4. Value Investing
Value investing refers to discount purchasing. They want to find a bargain and pick stocks that are likely to be traded at less than their book value. Whenever investors find that the stock market is going to overreact to the good and bad news of stock price movements even if it doesn’t correspond to a company’s long-term fundamentals, they take advantage of such overreaction by buying stocks at discounted prices.
They use fundamental analysis results to find out such stocks and make investment decisions. Often, they are long-term investors of quality companies. If they do not have time to invest in analyzing financial statements in search of value stocks, they can choose mutual funds, ETFs, index funds that hold value stocks.
5. Small-cap Investing
Investors who are ready to take a little more risk in their investments, they can choose the small-cap investing strategy. Stocks with smaller market capitalization are small-cap stocks. They are highly volatile stocks. These are high potential stocks offering higher returns but involve higher risk also. Small-cap stocks should be traded by experienced enough investors because of their volatile nature.
Strategy Decision Determinants
There are several factors that affect your investing decisions. Here are the four elements on which your investing strategy will be dependent:
1. Investing Objectives
– Why you are making the investment?
– How much an investor wants as a final amount?
2. Risk-Return Ratio
You want to take the risk for a high return or not.
3. Time Horizon
You want to make investments for a short term or long-term period.
4. Income or Growth
You want regular income or growth in capital.
Hope, now are able to choose the perfect strategy for you as per your investing profile regarding risk, income, time and growth.