Introduction - Investing Strategies
Investing Strategies - Investing in the stock market is very interesting, isn’t it? With the scope of profits comes the risk that if not taken care of could turn the tables around?
Ever wondered how do big and famous investors make huge amounts of profit despite the risk factor? Yes, you’re correct!
They invest strategically.
What if you could know some of the strategies and imply them to your portfolios? You’re at the right place. The Blue Chip – Finance and Investment cell of SVC has brought to you this series of famous investing strategies.
Here let’s look at some of the famous investors and investing strategies used by them in detail.
It is often said that one great thing to learn is to “Pick stocks like Peter Lynch”. Peter Lynch is a well-known American investor, mutual fund manager, and philanthropist. He has written three books on investing namely One Up on Wall Street, Beating the Street, and Learn to Earn. He has coined some of the best-known strategies and tips to invest in the stock market.
Three Golden Rules -
Invest in stocks that you understand: Simply putting buy stocks of the company whose core business you’re able to understand. It will serve a two-fold purpose: Firstly, you would be able to understand the decisions of the company and use the available information to analyze the company’s current and future position.
Secondly, if you invest in the company you’re interested in, you could make better gain than investing in the company you are not interested in.
Do your research: A very important factor affecting the investment decision is the analysis of the company’s position. In-depth research gives you a clear picture of a company’s financial position and future growth prospects which provides better aspects to make an informed decision. Some of the factors to look upon including the Price /Earnings to growth ratio, sales percentage, and good cash flows, etc.
Hold shares for a longer period of time: Lynch advises and strongly believes that the success of the company is completely correlated with the success of its shares in the long run. Hence long-run investment would help you make a greater amount of gains in the growth and long-term projects of the company. In short, if you own the shares of a company you’re interested in and you’ve done appropriate research, the long-term holding would pay off.
Avoid hot stocks in hot industries: By hot stocks, Lynch meant the stocks that are most commonly heard of in the market, which gets the more favorable publicity. This is because these stocks may perform highly initially but might burn out gradually after the investors realize the growth is not enough to back the buzz. Also for common heard stocks, the risk of competition possesses a great threat to the growth of the stock. Therefore he suggests picking the stocks that might not are commonly heard but have high growth potential
James Beeland Rogers Jr. commonly known as Jim Rogers is an American investor and financial commentator based in Singapore. He is the author of many famous books on investment which include The World Famous Investors Way of Thinking, Investment Biker, and many more. Let’s take a sneak peek at his investment strategy.
Another investing strategies is a very famous way of investing popular among many well-known investors such as Warren Buffet is Contrarian Investing. In simple words, Contrarian is a person who acts against the set standard or propositions, who does not follow the crowd. A Contrarian investor is a person who trades against the market sentiments. We can say that he buys when the market sells and he sells when the market buys. The investments may include identifying the underrated stock, buying at a lower price (due to excessive market selling) and sell at a higher price (due to market buying), and making gains.
A very famous quote that aptly defines the contrarian market is “The best time to buy a stock is when no one else is interested in buying it”.
Jim Rogers is bullish on contrarian investing in Asian markets.
There are a variety of approaches to invest in the market apart from the two discussed above. These strategies can guide you about how to pick stocks and when to invest however these are no perfect rules. You must choose a single approach or a mixture of approaches that suit you and your investing needs.