When you first start investing, the investment landscape may seem expansive and sometimes too gigantic. But there are several tried-and-true strategies you may use to keep things simple. A sound investment approach may provide positive returns over time, free up your time to concentrate on other aspects of the process, and make investing so simple that you can enjoy more time doing the things you like.
“Investment strategies help investors decide how and where to invest based on their projected return, risk tolerance, corpus volume, short and long holdings, prefered industry, etc. Investors may tailor their investing plans to the goal and objectives they would like to accomplish,” says investor and small business loan provider Shane Perry of Max Funding.
Read on our curated list of the five well-liked rookie investing strategies you should know before you start trading.
#1 Value Investing Strategy
Value investors are bargain hunters. They search for undervalued stocks. They hunt for equities whose pricing, in their judgment, does not accurately represent the security’s fundamental worth. Value investing is partially based on the notion that the market is somewhat irrational. Theoretically, this irrationality offers chances to purchase stocks at a bargain and profit from them.
Value investing is ideal for investors who want to retain their shares for an extended period. Investing in value-oriented enterprises can take years or perhaps longer for their operations to grow. Value investing prioritises the long term and often tries to approach investors with a slow, steady development philosophy.
#2 Income Investing Strategy
The income investing strategy focuses on earning cash flow rather than investing in equities that enhance the value of your portfolio. An investor may generate two forms of cash income: dividends and fixed interest from bonds. Such a strategy is employed by investors searching for consistent asset returns.
#3 Passive and Active Strategies
The passive strategy entails the purchase and long-term ownership of equities, with fewer transactions to offset higher transaction costs. Generally, passive strategies are less risky since they are believed incapable of outperforming the market because of their volatility. Conversely, active strategies require a lot of buying and selling. They think they can do better than the market and generate more returns than the typical investor.
#4 Cost Averaging Strategy
Cost Averaging Strategy involves investments made consistently over an extended length of time. The Cost Average Strategy favours investing across several time frames rather than all at once. Blue chip firm stocks and defensive stocks, guaranteed to demonstrate a robust and steady development, are the most popular stocks in which people want to deposit their money on a regular basis. Averaging the cost per share of the acquired stock is made more accessible by making periodic purchases in the shares of a single firm at various times. The cost averaging strategy is ideal for those who want to accumulate savings over time but do not have a substantial sum to trade in the markets.
#5 Contrarian Investing Strategy
The Contrarian Investing strategy allows investors to buy company stocks during a depressed market. This strategy emphasises buying at a discount and selling at a premium. The stock market often experiences downturns during bad economic times, war, natural disasters, etc. Nevertheless, investors shouldn’t just purchase company shares during a slump. They need to keep an eye out for businesses with the potential to grow in valuation and a brand that bars competitors from doing business with them.
Wise, Worth, Wide—Financial Intelligence Pays Off
Having an investing strategy is paramount. It will be beneficial and guide you in discarding poor portfolios. Ask yourself some fundamental questions: How much am I willing to invest? How much money must I get back? How much can I risk taking? What time frame will I be investing over? Your investing decisions will be better if your goals are more clearly defined. Keep an eye out for potential possibilities and avoid making investments all at once. Growing your portfolio is like building a home—take one step at a time.