Stock Investment Strategies
You probably might have many investment queries if you are new to the stock market. What is the best stock to buy today? When should I buy it? Why should I buy it? You may have so many similar questions.
This article will help you pick out some of the best investment strategies for your stock market investment.
Following are some of the widely used and time-tested strategies for investing in stocks:
1) Value investing:
This is the most common strategy for wealth appreciation. When you look at the likes of Warren Buffet and Radhakishan S Damani, they are value investors who made their billions investing via value stock investment strategy. In this strategy, you do not buy a share but you buy a business. You only invest in a business that has an under-valued share and has delivered consistent performance.
It’s called value investing strategy because herein your focus isn’t on the share but the value-generation prospect of a company. The focus is on planning a few years in advance by choosing the market leaders of the future.
2) Know the company:
Most new investors in the market look for the best stock to buy today. However, the market is a volatile place. What sells today may not work tomorrow. Therefore, it is always better to not focus on the best stock to buy today, but on a company with a bright future. You should look deep into a company’s track records. How did the last three years look? Is the debt going up? Is the equity performing? Are there any legal coups?
These are all questions that will help you understand the company better. Make sure to choose a company that has been undervalued in the market’s current cycle but holds potential for the future.
3) Don’t scatter your eggs:
Stock market investors often swear by diversification to avoid risks. But we believe that with equities, risk is inevitable regardless of how safe a stock may seem. People still invest in the stock market. Why? Because there are huge profits as well. Diversification can provide a safety cushion, but it will also prevent huge profits. They say never put all your eggs in one basket, but if it is a well-threaded, power-locked basket, we ask why not? You can pick the right equities that match your portfolio, goals, and tolerance. It is better to invest in a few select names than 40 names you are not fully familiar with.
4) Buy and hold:
Having a practical timeline for your investment should be your main focus. Many people buy quality stocks but expect too much out of them. When the money does not quadruple in a month, they end up abdicating the investment and withdrawing every single penny, only to find out later that it was a good stock. If you have purchased something, be patient with it and give it a try for the long term. Equities are likely to perform over years, and that’s why investors are discouraged from buying and selling fast.
5) Practice caution:
While buying and holding the stocks in your portfolio is the advice for most shares, do keep in mind that a company’s performance can take a hit over the years. What this means is unforeseen developments can push a company towards decline. A once profitable stock can become a loss. This is why it is a good investment strategy to not neglect your portfolio and to keep in touch with the actuals of the companies you have.
6) Trust your tracks:
And of all things said and done, time is the best teacher. With your intuition and stint in the market, you will pick up lessons on what works for you. Start low and be vigilant and with time you’ll be able to see real value generation. You will create a bouquet of securities and funds that perform well. Experience, after all, is the best stock market guide!