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Investment Styles

Aspects of Investments

There are many different ways into investing however mainly four aspects will stand out time and time again. In their respective order below,

• Invest early
• Invest patiently
• Invest wisely
• Invest regularly

Looking at the following aspects of investment, and having waded through many company financials, I continue to be fascinated by the various techniques some people have. Let's face it we are very dissimilar in many ways yet we all strive for a single goal, success in our investment.

Investment styles that have been used by so many successful investors to generate large amounts of money are simple yet complex. Simplicity is in the thought process and the complexity is in the execution of the plan. Once an investment plan is executed, it should not be altered unless drastic changes in the original plan have moved off course from the initial goal.

When you invest your hard earned money into a stock, you release that money into a market heavily studied by many and their goal is no different to yours. In case you are your own investment advisor and without any professional advice, it may be worthwhile to know some different investment styles used. It is best to aware of these different styles in order to have an edge in the market.

Fundamental Analysis

Fundamental analysis is mostly concerning long term investors. Investors in general will keep the money in the market for a long term until the initial plan to realise the expected profit is reached and then pull the money out by selling the stock. Some investors will continue to hold the stock as it provides a stream of income. Why lose a stream of income while the stock is steadily creating wealth through payment and the share price is appreciating. That is an ideal situation for an investment.

Technical Analysis

Technical analysis involves charting and reading certain indicators for timing and triggers. This type of investing is mostly for day traders, swing traders and for long term investors looking for a proper and timely entry into a particular stock. For day traders, this is an opportunity for cash flow, many realise great wealth from this method of day trading for income, buy low sell high and using the momentum and volatility during the day, profits may be made on a daily basis. However much expertise is required in this method. A declining market may also lose a day trader money. 

Growth and Value

There exists a fine line between growth investing and value investing. Growth investing is favouring those stocks which have an expected future growth. It should not matter if a growth stock is expensive now as long as there is enough clues as to its future price to earnings multiple. Of course we need to realise the best entry point regardless because we should not simply enter the market on anticipation of growth in 10 years if we are able to realise the same in 5 years. This money could meantime be invested in something else that can realise a return meantime. As long as the future earnings projections remain strong it should be a consideration. Speculative stocks are often included in this category due to high growth relevant to entry price.

Value investing is not so much looking at growth for now, but it is the realisation of the best possible entry point in a specific stock based on fundamentals, in other words buying at the absolute bottom of a fundamentally sound stock. The value in this is that the company in question is yet to be discovered by the market in general and basically is currently undervalued according to fundamental analysis or the company's balance sheets. The company is more likely to be either currently unpopular or its earnings may be underestimated for the specific sector or compared to its competition, hence the lower value of the share price of the stock. By doing this it is very likely that if the company is successful many could reap great rewards from its venture.