The top 10 types of investment strategies as the name implies may not be the ones that have the highest investment returns. A closer consideration will point out that the top ones are those that have greater chances of risk tolerance.
When investing, the option of instantly acquiring wealth should not be the prior motive. Instead, the thought should be on choosing what style can best work to actualize a plan.
Many styles exist, and while some strategies may work for you, other investors may find the same unappealing.
However, out of the many strategies we have; listed below are the ten popular ones that can help you make wise decisions. (see also Best Investment Strategies for Beginners)
Types of investment strategies
1. Value Investing
With value investing, a good understanding of how the stock market operates is important. To gain this knowledge the investor may need a financial advisor or stock market analyst for information.
The analyst would help to give statistics on how the price fluctuates in the stock market. Having done this, the investor would purchase stock when the price fails and then monitor market trends.
Then the investor can sell at a stable price or when the price of the stock rises. The two aspects to value investing are knowing when a stock undervalues and overvalues.
There is more advantage in value investing in terms of risk management. This is because most other stocks which have a high potential rate could be purchased at undervalue price and when sold at the inherent price would yield more gain.
2. Growth Investing
Growth investing relies more on capital growth. Investors who apply this strategy usually look out for companies that display potential growth in earnings as compared to other industries or the stock market.
In growth investing, investors are mostly interested in capital pay raises but this can be a great risk. All because most start-up companies with good potential earnings would rather prefer to reinvest their profits.
As the chances of growth become visible, they would sell stock at a high price. Investors/shareholders would be at a disadvantage, as the company may not pay any dividends.
3. Buy and hold investing
The buy-and-hold investment strategy builds a secure portfolio that utilizes long-term investment.
This principle displays a situation where the investor buys a certain investment instrument and holds them for a longer time.
Irrespective of market fluctuation, the goal is to actualize profit at the end. This is also a long-term investment strategy.
4. Quality investing
Here, Investors look out for companies with notable quality performance. When assessing the quality of performance, the judgment is based on having high features, measurement, and good managerial skills.
In a clearer form, investors prefer to purchase stock from those companies because they trust their financial stability. They believe that quality stock can yield constant revenue and maintain stability in times of public sale.
In quality investing, the main intention is having quality than quantity.
5. Index investing
In this investment strategy, also called passive investment an investor builds a portfolio and uses it to monitor how the market index operates.
Investors with long-term goals mostly utilize this strategy due to its advantages of utilizing numerous companies’ shares to manage portfolios.
Index investing offers investors a good opportunity to stock diversification. This is because the expenses involved are lower as compared to other investment strategies that have active management.
6. Active investing
In this strategy, Investors prefer to actively purchase and sell their stock because they understand their preferences. They select and march investments that align with each other for easy portfolio management.
They believe those stocks will perform better in the stock market. The intention here is to make a profit within a short-term duration.
7. Socially responsible investing
In social investing, investors seek companies that have social values in financial returns. Companies whose products can make a positive impact on the environment and society.
Although, this strategy does not promise investors good returns as the name suggests. Investors still need to gain enough assets to the investment financial record to push through.
This strategy emphasizes risk in terms of the political and social climate. Whereas, if those expected values are not met, it becomes unfavorable to investors.
8. Income Investing
The income investing strategy relies more on gaining revenue regularly. It utilizes a system of portfolio management having various investment instruments.
Those assets generate high revenue and the method of diversification results in less risk. One advantage of income investing is that generating more stock could contribute to wealth creation.
9. Short-term investing
This strategy is also a marketable investment just like the long-term, the principle here is to generate revenue within a short period. This strategy can be beneficial to investors as it makes a withdrawal of cash more convenient although it generates low returns.
10. Small-cap investing
This strategy defines a more difficult approach, hence investors who chose this style have to be more knowledgeable about the stock market.
It is a risky investment as compared to large-cap stock because the investments are made in small companies. Those companies have smaller markets but because they are emerging companies with great potential, investors may gain higher.
