Strategies: The seasoning for your investment portfolio needs
By Arney Tjaronda
BBA Student: Banking & Finance Major at the University of Namibia.
Managing a portfolio is like raising a baby, because one constantly need to look at different methods on how to nurture it, grow it to prosperity. Having over 4 years of trading and investing experience, I learned a thing or two about different strategies which helped me grow my portfolio. All investment strategies are ethical and deemed fit for your portfolio. However, it is important to consult your brokerage firm before implementing them.
Understanding Investment Strategies
Investment strategies are different principles designed to help individual investors achieve their desired investment goals. Based on the type of investor you categorize yourself, there are different type of strategies to caters your preferences. Some of them do not require you to do anything, while others require technical understanding on what you are doing. In most cases, investment strategies depend on your age, goals, lifestyles, availability of capital and how much returns you expect. As an investor there is no right or wrong strategy because it all depends on the asset classes in your portfolio. To further understand investment strategies, there are different types of strategies we will disclose.
Types of Investment Strategies
Passive and Active strategy:
The passive strategy involves buying and holding stocks and not frequently engage in them to avoid the high transaction costs. Passive strategies cannot outperform the market due to its volatility, hence it tends to be less risky. On the other hand, the active strategy involves the frequent buying and selling. They are believed to outperform the market and can gain more returns than an average investor would.
Growth Investing strategy:
This strategy mainly depends on holding periods based on the value the investor decides to create in their portfolio. If you believe that the company stock will go up in the following years, as an investor you will buy the stock for long-term gain.
Value Investing strategy:
This strategy was made popular by the investor, Warren Buffett. This strategy starts by looking at its intrinsic value of undervalued shares by the stock market. The general principle waits on the correction of the stock market. When that happens, the price of the undervalued stock shoots up causing investors to profit from the sale of the shares.
Income Investing strategy:
This strategy focuses on generating cash income from stocks rather than investing in stocks that only increases the value of your portfolio. This strategy is used by investors who wants income from dividend and fixed interest income from bonds.
Dividend Growth Investing strategy:
This strategy is for investors who looks at companies that consistently pay out dividend every year because those companies that pay out dividend every year are stable and less volatile compared to other companies.
To sum up, those are some of the strategies that you as an investor can use to add value to your investment portfolio. However, it is advisable to consult your financial advisor or stockbroker because this is just one man’s opinion.