Investing is undoubtedly overwhelming. However, certain tried-and-tested strategies can make things much easier. You can accomplish tons of your financial objectives and lay the groundwork for a lifetime of financial stability with these popular investing options.
This guide lists 7 popular investment strategies in the stock market that you can use as a beginner. Have a look!
- Adopt both active and passive strategies
To minimize high transaction costs, the passive method is all about purchasing and keeping stocks rather than trading them on a regular basis. Here, traders see the market’s volatility as proof that they cannot beat it, so they opt for safer passive strategies.
Note: However, active strategies call for regular purchases and sales. Traders here may generate a greater amount of profit than any average investor would, by beating the market.
- Growth investing (both Short-Term and Long-Term)
Growth investment involves investors putting their money into companies they think will grow in the next few years, increasing the stock’s value and helping them build their portfolio. On the other hand, short-term holding is for investors who think a firm will provide good value in the next year or two.
Tip: You can have a look at these investment options using the best online trading platform India for a clearer understanding. Under this, the holding period depends on the investors, considering factors like how quickly they would want retirement funds, buy a house etc.
- Income Investing
Instead of investing in stocks whose sole purpose is to raise your portfolio value, this strategy helps you generate cash from stocks. As an investor, you get two forms of monetary income: dividends and fixed interest from bonds. Those who want a reliable stream of income from their investments can choose this strategy.
- Contrarian Investing
During market downturns, this strategy helps investors to purchase company stocks. Buying at a lower rate and selling at a higher rate is the main focus of this strategy. Generally, when there is a recession, war, natural disaster, etc., the stock market tends to go down. As an investor, it’s crucial not to purchase stocks blindly. Instead, focus on companies with strong branding and significant growth potential.
- Indexing
Under this strategy, investors can put a tiny amount of their stock portfolio into a market index. Some of the options include mutual funds, exchange-traded funds, S&P 500.
- Value Investing
As the name suggests, value investing involves investing in a company based on its intrinsic value. Often, these companies are undervalued by the stock market. Nevertheless, traders still adopt this popular strategy. The idea is, that when the market undergoes a correction, the value of these undervalued companies will be corrected.
As a result, the price of the company shoots up, leaving investors with huge returns when they sell. This is the main reason behind investing in these companies. Even the world-renowned Warren Buffett uses this strategy.
- Dividend Growth Investing
The goal of this investing tactic is to identify and hold onto firms that have a history of reliable annual dividend payments. Companies that have been paying dividends for a while are more reliable investments because they know their shareholders value a steady return on their money and work hard to improve their dividend distribution each year. The best part is, you can reinvest these dividends and get the long-term benefit of compounding.
Conclusion
Although investing sounds delightful, it’s not easy. Ultimately it all comes down to executing the right approach and sticking with it to keep things sorted. Additionally, it is important to have a strategy nevertheless.
While there aren’t any success guarantees, having an investment strategy before entering the stock market eliminates the potential risk and bad investments.
