Stock Investment Strategies

Stock Investment Strategies

Are you also the one who makes the investment in the stock market?

Today we are here to give you some of the basic strategies for stock investment.

So, you have read the topic correctly which is on “What are the Stock Investment Strategies?”

So here NTA® introduces you to all the basic strategies that are important for all the participants of the stock market.

What is the Stock Investment Strategies?

Value Investing Basics

The strategy of value investing, in the easiest terms, means buying stocks of companies that the marketplace has undervalued.

The goal is not to invest in the no-name companies that haven’t been recognized for their potential that fall more in the venue of speculative or penny stock investing.

Value investors are typically the ones that buy into strong companies and are trading at a very low price that an investor believes doesn’t reflect the company’s true value.

Value investing is all about getting and finding the best deal, similar to getting a great discount on a branded product.

When anybody said that a stock is undervalued, it means that an analysis of their financial statements indicates that the price of the stock is trading at lower than it should be based on the company’s intrinsic value.

The marketplace is not always correct in its valuations and thus stocks often simply trade for less than their true and fair worth, at least for a significant period of time.

If you pursue a value investing strategy, the goal is to seek out these undervalued stocks and to buy them up at a favorable price.

Value Investing Long-Term

The value investing strategy is simply straightforward, but practicing this kind of method involves more than you might think, especially when you’re using this method for a long-term strategy.

It’s important to avoid the temptation and greediness to try to make fast cash based on flighty market trends.

A value investing strategy is based on buying into the stocks of strong companies that will maintain their success or growth and that will eventually have their intrinsic worth that will be recognized by the markets.

Warren Buffet, one of the greatest and most prolific value investors of the century, once said that “In the short term, the market is a popularity contest. In the long term, a market is a weighing machine.”

Buffet's basic principle on his stock choices that should be based on the true potential and stability of a company and looking at the completion of each company instead of simply looking at an undervalued price tag that the market has assigned to the individual shares of the company’s stock. 

The Basics of Growth Stock Investment Strategies 

While growth investing is, in simple terms known as the “opposite” of value investing, many value investors also employ a growth investing mindset when settling on stocks.

Growth investing is almost similar, considering it in the long-term, to value stock investing strategies.

Generally, if you’re investing in stocks based on the intrinsic value of a company and with the potential to grow in the future, you’re opting for a growth investing strategy.

Growth investors are differentiated in between strictly value investors by their focus on the newly opened companies that have shown their potential for some significant, above-average growth.

The growth investors look at companies that have repeatedly shown indications of growth and substantial or rapid increases in business and profit.

The favorite financial metrics used by mostly all the growth investors include earnings per share (EPS), profit margin, and return on equity (ROE).

A Fusion of Value and Growth

To be honest, if you’re considering a long-term approach to investing, a fusion of value and growth investing, as Buffet so effectively employs, may be worth your consideration.

There are some good reasons to back up taking these stock investment strategies.

Historically considered, the value stocks are usually the stocks of companies in cyclical industries, which are largely made up of businesses producing goods and services that people use their discretionary income on.

Because of the seasonality, the value stocks typically perform well in the market during times of business recovery, but they are likely to fall behind when there is a bull market sustained for a long period of time.

Growth stocks typically perform better when there is interest rates drop and companies’ earnings take off.

They are also typically the company’s stocks that continue to rise even in the late stages of a long-term bull market.

On the other side, these are usually the first stocks to take a beating when the economy slows down.

A fusion of growth and value investing provides you more of the opportunity to enjoy higher returns on your investment while reducing a substantial amount of the risk.

Passive Index Investing

Index investing is a much more passive form of investing when it is compared with that of either value or growth investing.

Accordingly, it involves far less work and strategizing that involves the part of the investor.

Index investing diversifies an investor’s money widely among various types of equities, hoping to get the same returns as the overall stock market.

From this, one of the main attractions of index investing is that many studies have shown the results that few strategies of picking individual stocks outperform index investing over the long term.

These are the basic understanding of the strategies that are used in the stock investment by the traders or the investors.

About Us

This article on “What is the Stock Investment Strategies?” explains the fundamental strategies usage and their importance in the stock market.

NTA®  is our institution that focuses on imparting education about trading in the stock market to the individual who has a keen interest in the stock market and wants to do trading. From this article on “Top 10 Golden Rules for Intraday Trading” we had mentioned all the important rules that are essential for intraday traders. We hope that the rules are quite easy to understand and easy to imply in the trading. Stay Updated and Learn Daily from the Stock Market.