Investing Strategies

Investment Strategies-Why it is important to rethink it?

An Investment Strategy is a wording that characterizes your direction and nature towards your cash. Individuals frequently plan for each of all shapes and size thing in their life like when to wed, when to purchase the vehicle, when to travel to another country for occasions, when to resign and so forth yet, what is the key of every one of these plannings are generally overlooked by us.

Importance

Individuals have a different outlook on their profit objectives and goals while selecting among different options. Many of us would not able to just think that what type of strategy we are following for our investment and does it require a change as per our income objectives and age.

Life is full of changes, filled with uncertainties, and every time it requires the adoption of new procedures, policies, structure, and many other things.

If today I will make a statement or formulating and structure for solving any problem then it would be according to the current scenario and it can be best for today but can be worst for tomorrow because nobody knows that what would be the future challenges and targets. Likewise investing strategies works, every time it keeps on changing as per our purpose, objectives, growth, etc.

We will try to see all types of investment strategy that is possible to date

Blind Investing

The first investment strategy is investing blindly. These types of investors either a noninformative investor or a busy investor. while making the investment strategies it is very much important to understand the types of investors.

In this strategy investors blindly follow someone like relatives/brokers/friends to put their money anywhere and most importantly they don't have any knowledge about anything.

These investors are most badly affected in any inverse conditions in the market. This is the worst type of investing and we should stay away from it.

Value Investing

This strategy implies investing your money in the ventures when they are undervalued and selling those ventures when they are overvalued. This concept is introduced by one of the best successful American investors Warren Buffett, he gave many theories to investing and value investing is the one on which he most emphasized. Buying the stock when they are below their intrinsic value and selling them when they are overbought is the fundamental principle of Warren Buffett. Finding the fundamentally strong companies below their intrinsic value is the most difficult task and rare chance to come and if it happens then we should not think twice to invest at that point in time.

History told that there were phases where the stock market reaches the point when you were getting all the companies below their intrinsic values but there was extreme fear at that time and most of the investors were selling due to panic.

Valuation instruments that we can utilize while valuating the organization before Investing

• Price to Earnings Ratio(PE ratio)
• Price to book ratio(PB ratio)
• Price to sales ratio(PS ratio)
• checking with ROE(Return on equity)
• checking Balance sheets
• Annual Reports valuation
• Peer group comparison
• Dividend Yield
• SWOT analysis of the company

Growth Investing

Growth Investing strategy is opposite to value investing in terms of price to earnings ratio(PE ratio).

Individuals look just broad development in a specific organization regardless of the most noteworthy PE level and least risk-reward ratio. This is an unsafe hypothesis in light of the fact that the interest in this procedure is at the most greedy levels of MMI INDEX(Market Mood Index). 

This strategy focused on capital appreciation. The followers of this strategy are known by growth investors who put resources into organizations that display indications of better than expected development, regardless of whether the offer cost seems costly.

We can take the example of pharma companies nowadays in Covid-19 scenario, they all are at the there highest point and very expensive in terms of all metrics PE RATIO, PB RATIO, EPS, etc but still everybody is bullish into it so investing this time in this sector would be termed as growth strategic move.

Small-cap Investing

Small-cap Investing is very proactive strategic investing as these investors pick the stocks of very small or start-up organizations with the hope that one day they will become medium cap and then large-cap. Small-cap investing some times turns into multi beggar stories and some times it sucks all the value of investors. Small-cap is a term used to recognize organizations with generally little market capitalization. In India,  an organization under the capitalization of Rs. 5000 crores are covered into that. Small-cap stocks should be utilized by progressively experienced hands as they are increasingly unstable and subsequently difficult to trade.

Reasons to follow this strategy by investors

• upside growth potential
• small-caps more frequently acquired by large caps
• very cheaper valuations
• can hold in the company for years/very longterm view
• very positive about any particular sector or organization
• monopolistic work profile

Contrarian Investing Strategy

Contrarian meaning going in the contrary direction. This is selecting the stock when it is at its oversold territory and selling it when it is in overbought territory. There are phases in the market when everybody is selling in a panic then you have to buy the stocks and when everybody is buying and markets are in extreme greed situation then you have to sell your stocks. In the time of economic downturn, there are numerous chances to purchase great offers at sensible costs. A good company comes below its intrinsic value at this time only. An organization must have a solid upper hand, that is it has a market position, good branding, a good cash flow statement, etc to beat the competitors and stabilize them in that scarcity also. 

Latest by 23rd of March 2020 when the stock market turned off on the lower circuit due to COVID-19 pandemic and all the stocks came on their lowest valuations and broken up to 50 %, that was the time of investment for the contrarian investor.

There are a few points to be taken into consideration while following this strategy:

• a company must be in their growing years
• a company should be seated on a healthy cash flow
• a company should have a continuous improving balance sheet
• a company should have a record of following proper CSR norms
• a company should be a leader in its peer group

Dividend Strategy

This methodology includes putting resources into organization shares as indicated by the future profits gauge to be paid. Organizations that deliver reliable and unsurprising profits will be less volatile in nature. Numerous stocks, securities, and shared subsidize offer profits to financial specialists. Profits give a steady income that helps to improve venture returns, they are really a solid match for regular investors.

Indexing Strategy

Indexing strategy is for passive investors, they simply invest their small portion of money equally in all the listed companies of Index using Index funds or they can invest customize their funds in all the sectors of the index. It is at their best, offer an easing path for financial specialists to follow famous stock and security. One may consider it on the off chance that we do have any information about the value on the grounds that on a normal you can get great positive returns toward the finish of your investing tenure.

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