Examples of An Investment Strategy
Many in the business world invest their capital in different business with the hope of making profits in the end. For one to make the right investment, one needs a strategy or plan which serves as a guide to direct you through an investment process. It helps the potential investor to dispose of any possible investments that may likely perform poorly with time.
While trying to create an investment strategy, it is pertinent to take into consideration what you intend to accomplish, and one needs to understand the investment strategy he or she is trying to create.
What is an investment strategy?
An investment strategy is a strategy or plan that aids investors in choosing how and where to make their investments with respect to risk appetite, long or short term holdings, expected returns etc. An investor can create an investment strategy with respect to the goals and aims he or she intends to accomplish.
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Examples of an Investment strategy
Let us consider the various examples of investment strategy.
• Growth investment strategy
• Passive investment strategy
• Value investment strategy
• Indexing strategy
• Contrarian strategy
• Dividend Growth investing strategy
• Income investment strategy
- Growth investment strategy: Growth investment strategy which is otherwise referred to as short and long term investments, is an example of investment strategy where investors, based on the value they intend to create in their portfolio, chose the holding period return. If the investors happen to believe that overtime, the company will grow and the natural value of a stock will rise, they will be motivated to invest in such companies so as to build their principal value. More so, if investors see that a company will yield profitable value within a year or two, then investors will settle for a short term holding.
- Passive investment strategy: Passive strategy is an example of investment strategy that has to do with the purchase and holding of stocks and not frequently deals in them so as to avert higher transaction costs. It is their belief that they cannot surmount the market because of its unpredictable nature, as such passive strategies contains less risk as compared to growth investment strategy.
- Value Investment Strategy: In value Investment, one invest in a company by taking a look at its natural value because of how devalued the company is by the stock market. The though behind investing in these kind of companies that the value of these devalued companies will be corrected any time the market embark of correction processes, which results in price increase and a corresponding high returns for the investors when they are sold.
- Indexing Strategy: In this type of investment strategy, investors are allowed to invests a small portion of stocks in a market index or scale. These can possibly be exchange-traded funds or mutual funds.
- Contrarian Strategy: Contrarian strategy allows investors to purchase companies’ stocks at the time of the down market. The main focus of Contrarian strategy on purchasing at a low price and selling at a high price. The downtime in a stock market is mostly at the time of war, pandemic like the present one facing the world (covid-19),recession etc. Not only should investors focus on buying stock during the downtime, but they should also take a cursory look at companies that are capable of building up value and also have a brand that can prevent access to their competition also.
- Dividend Growth investing strategy: In Dividend growth investing strategy, investors take a look at companies that constantly pay dividends yearly. The reason is that these companies that consistently pay dividends every year are stable and resolute with less volatility with the objective of increasing their dividend payout every year.
- Income investment strategy
In income investment strategy, cash income generation from stocks is the main point of focus. It doesn’t dwell on investing in stocks that will only increase the value of investor’s portfolio. An investor can actually make his earnings from two different types of income which are: (a) Fixed interest income from bonds and (b) Dividend. If you are looking for a stable income from investments, then you can settle in for this type of investment strategy.
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