Any successful venture is at all times preceded by a full-fledged strategy. Active or passive investment strategies, both of them entail determined decisions and responsibilities. Because investing is not a sure thing in most case, it is much like a game – you don’t know the outcome until the game has been played and the winner has been declared.
As an investor your plan of distributing assets among various investments, taking into consideration such factors such as individual goals, risk tolerance and time horizon.
Usually the strategy will be designed around the investor’s risk-return trade off: some investors will prefer maximize expected returns by investing in risky assets, others will prefer to minimize risk, but most will select a strategy somewhere in between.
The main question is to find the necessary investment strategy. It means that you should find the most profitable investment property or investment market with minimal risks.
One of the better-known investment strategies is buy and hold. Buy and hold is a long term investment strategy, based on the concept that in the long run equity markets give a good rate of return despite periods of volatility or decline.
There are different investment strategies which are based on their priorities and demands, such as:
- Growth investing: If you are a growth investor you will be looking for companies that traditionally have high growing earnings. In theory, high growth equals high stock prices and in turn, high profits. Companies promoting growth investing can achieve initial success but tend to be limited by capital. While the rewards can be very high in growth investing, the risks are high as well.
- Income investing: If you are an income investor, you are conservative and understand things easily. Income investors target companies that consistently pay high stock dividends. This is a preferred stock market strategy for those around retirement age. This investment strategy looks for companies that tend to be large and well-established. There is always a risk in stock market investing, but income investing is the most conservative investment strategy; in fact it is also known as defensive investing because it tends to protect you (investor).
- Value investing: If you are a value investor, you’ll try to find stocks that have been overlooked by the rest of the market. While this doesn’t necessarily mean they are low priced stocks, it does mean that whatever reason, the market has undervalued a particular stock. Many times a stock gets overlooked while investors chase profit in another company in the same stock sector. Technical analysis is important with such companies since you don’t want to confuse undervalued.
As the investors are reaching out to the equity market more often, in the markets that appears like investors can do no wrong and euphoria among the investor community is palpable. A 5-point investment strategy can be drafted for this scenario:
- Invest in tax –saving funds: Tax saving funds has emerged as strong contenders from the equity-oriented funds segment. If you can take on the risks associated with tax-saving funds, then you must consider making investments using the systematic investment plan route. This will ensure that you can spread your investments over long time horizons and avail benefits of rupee cost averaging. It has a 3 year lock period.
- Invest in large cap funds: By investing in such funds, your portfolio is exposed to a large cap variety, may be in small amounts but in line with your overall risk profile. It would provide you the opportunity to diversify your portfolios and be better insulated in case of change in trend in the markets. However, you as an investor will have lesser choices in this section.
- Restructure your Portfolio: When you have decided where to invest, you should then realign your portfolio in sync with your risk-appetite. Another thing would be to dispose off the poor quality investments you might have made earlier.
- Curb your Enthusiasm: It’s important that you should resist the temptation to make a quick buck and continue to invest in line with your risk-profile.
- Get sound Advice: A good investment advisor will help you successfully ride in surge in markets and emerge a winner; he can also assist you achieve your objectives.
While designing investment strategies, you should have the acumen to analyse the financial market. For this, you should equip yourself with the knowledge of:
- High grade bonds: Prices rise. These bonds continue to provide excellent returns
- Low grade bonds: Low grade bonds remain attractive.
- Commodities: Commodities are still weak.
- The broad stock market: The stock market is strong.
- Stock sectors: Investment in commodity driven stocks remains unattractive. Financial stocks and technology stocks outperform the broad market.
There is a simple rule to mathematics that is unavoidable: the higher the price you pay for an asset in relation to its earnings, the lower your return. The same logic you should apply while investing in stocks. Instead people get excited about stocks that rapidly increase in price; a completely irrational position for those that were hoping to build a large position in the business.
After looking at the way all the emerging industries in different countries work, and how the different financial institutions (banks, government bodies) react to the temperamental market behavior, the first lesson for you to go where the growth is.
If you are a novice investor, work closely with a financial planner before making any investments.
Keep in mind, that companies and industries will come and go in the blink of a historian’s eye. Reason more to stay nimble in your investments. Make sure that you always have an exit strategy if developments take unexpected turns.
Never invest money without having a goal or strategy for reaching that goal! Nobody hands their money over to anyone without knowing what that money is being used for and when they will get it back! If you don’t have a plan, a goal or a strategy, that is essentially what you are doing! Always start with a goal and a strategy for reaching that goal.
Energy stocks drag down FTSE 100, IG Group slides
By Shivani Kumaresan
(Reuters) – London’s FTSE 100 slipped on Thursday, weighed down by falls in energy stocks as oil prices slid after a surprise increase in U.S. crude inventories, while IG Group tumbled on plans to buy U.S. trading platform tastytrade for $1 billion.
The blue-chip FTSE 100 index lost 0.4%, while the domestically focussed mid-cap FTSE 250 index also slid 0.4%.
Energy majors BP and Royal Dutch Shell fell 3.2% and 2.5%, respectively, and were the biggest drags on the FTSE-100 index. [O/R]
“What is holding back the UK is a lack of tech stocks to capture the ‘rotation’ back into tech seen since Netflix results,” said Chris Beauchamp, chief market analyst at IG.
“Stock markets overall are much quieter today, looking so far in vain for a new catalyst for further upside.”
The FTSE 100 shed 14.3% in value last year, its worst performance since a 31% plunge in 2008 and underperforming its European peers by a wide margin, as pandemic-driven lockdowns battered the economy and led to mass layoffs.
British Prime Minister Boris Johnson said it was too early to say when the national coronavirus lockdown in England would end, as daily deaths from COVID-19 reach new highs and hospitals become increasingly stretched.
IG Group tumbled 8.5% after announcing plans to buy tastytrade, venturing into North America after a stellar year for the new breed of retail investment brokerages.
Ibstock jumped 7.3% to the top of the FTSE 250 after the company said fourth-quarter activity benefited from better-than-expected demand for new houses and repairs.
Pets at Home Group Plc rose 2.2% after reporting an 18% jump in third-quarter revenue, boosted by higher demand for its accessories and veterinary services as more people adopted pets during lockdowns.
(Reporting by Shivani Kumaresan in Bengaluru; editing by Uttaresh.V and Mark Potter)
Wall Street bounce, upbeat earnings lift European stocks
By Amal S and Sruthi Shankar
(Reuters) – European stocks rose on Wednesday after Dutch chip equipment maker ASML and Swiss luxury group Richemont gave encouraging earnings updates, while investors hoped for a large U.S. stimulus plan as Joe Biden was sworn in as president.
The pan-European STOXX 600 index closed 0.7% higher, getting an extra boost as Wall Street marked record highs.
All eyes were on Biden’s inauguration as the 46th U.S. President, with traders betting on a bigger pandemic relief plan and higher infrastructure spending under the new administration to boost the pandemic-stricken economy.
Tech stocks rallied to a two-decade peak in Europe after ASML Holding NV rose 3.0% to all-time highs on better-than-expected quarterly sales and a strong order intake for 2021.
Meanwhile, Richemont rose 2.8%, after posting a 5% increase in quarterly sales as Chinese splashed out on Cartier, its flagship jewellery brand.
Britain’s Burberry jumped 3.9% after it stuck to its full-year goals, saying higher full-price sales would boost annual margins, while Asian demand remained strong.
The pair boosted European luxury goods makers that are heavily reliant on China, with LVMH and Kering gaining between 1% and 3%.
“Any sign that retail spending is picking up in China is going to be a boost to the Western markets and those heavily exposed to it,” said Connor Campbell, financial analyst at SpreadEx.
The European Central Bank is set to meet on Thursday. While no policy changes are expected, the bank could face more questions about an increasingly challenging outlook only a month after it unleashed fresh stimulus to bolster the euro zone economy.
“With the new round of easing measures fully in place and no new forecasts to be presented tomorrow, it should be a fairly uneventful day for the euro,” ING analysts said in a note.
Italy’s FTSE MIB gained 0.9% and lenders rose 1.6% after Prime Minister Giuseppe Conte won a confidence vote in the upper house Senate and averted a government collapse.
Conte narrowly secured the vote on Tuesday, allowing him to remain in office after a junior partner quit his coalition last week in the midst of the COVID-19 pandemic.
Daimler AG jumped 4.2% after its Mercedes-Benz brand unveiled a new electric compact SUV, the EQA, as part of plans to take on rival Tesla Inc.
Germany’s Hugo Boss added 4.4% after Mike Ashley-led Frasers said it boosted its stake in the company.
(Reporting by Sruthi Shankar and Amal S in Bengaluru; Editing by Shailesh Kuber and Arun Koyyur and Kirsten Donovan)
Miners lead FTSE 100 higher on earnings cheer
By Shivani Kumaresan
(Reuters) – UK’s FTSE 100 rose on Wednesday as miners gained after a strong production forecast from BHP Group, while encouraging updates from luxury brand Burberry and education group Pearson drove optimism about the earnings season.
BHP Group Ltd climbed 2.8% after it forecast record iron ore production for fiscal 2021, helped by high prices for the commodity. Other miners Rio Tinto, Anglo American and Glencore rose more than 2%.
Global markets rallied in anticipation of more fiscal spending as Joe Biden prepared to take charge as the 46th U.S. president.
“There is a view in the markets that more spending is in the pipeline, after all, Mr Biden will want to start his presidency on a positive note,” said David Madden, market analyst at CMC Markets UK.
The FTSE 100 index rose 0.4% and the domestically focussed FTSE 250 index added 1.4%.
The FTSE 100 has recorded consistent monthly gains since November after the sealing of a Brexit trade deal and hopes of a vaccine-led economic recovery, but has recently lost steam as tighter business restrictions sparked fears of a slow rebound.
Burberry rose 3.9% as it stuck to its full-year goals and said higher full-price sales would boost annual margins and Asian demand remained strong.
Global education group Pearson jumped 8.6% after its global online sales grew 18% in 2020, helped by strong enrolments in virtual schools.
WH Smith Plc surged 10.4% to the top of the FTSE 250 index as its trading during Christmas was ahead of its expectations.
(Reporting by Shivani Kumaresan in Bengaluru; editing by Uttaresh.V, William Maclean)
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