Investment Strategies

    In finance, investment strategies
are the set of rules, procedures and behaviors designed for investors to select
their investment portfolio. A well planned investment strategy is crucial
before making any investment choice. Generally, business strategies are made
for long survival of the firm. Business strategy base largely depends on
factors such as risks in the investment and long term goals.

 

Different Kinds of Investment Strategies:

 

Discussed below are the different
kinds of investment strategies:

 

Passive Investment Strategy:

 

This strategy is also termed as passive
management, where a finance manager makes a few portfolio choices to minimize
transactional cost of a firm. Passive investment strategy is more common on the
share market industry, but is also becoming more popular in other investment
kinds such as bonds, hedge funds and commodities. Today, multitudes of market
indexes exist in the world and hundreds of varied index funds are tracking
them. The Vanguard 500 is one of the best and largest mutual fund organizations
that have adopted this strategy. The other two popular companies that adopted
this strategy are State Street, and Barclay’s Global
Investors. 

 

Active Investment Strategy:  

 

This strategy helps to maximize
the return on investment. It involves making decisions on purchase or sale of
stocks by foreseeing future market price for those stocks. Usually, the
prediction of stock market is based on a viewpoint of economic or market
condition that results from fundamental or technical analysis. Thus, this
investment strategy is totally based on an outlook of an aggregate market
rather than a specific stock.

 

Buy & Hold:

 

This is a long term investment
strategy based on the business concept that, the long term financial market
offers an excellent rate of return on investment, despite the period of decline
or volatility. In addition, this outlook holds the concept of market timing
that involves buying at low price and selling at high price. The retail and smaller
investors more typically make use of this strategy in real estate investment,
where an asset holding period is normally the lifespan of that mortgage.   

 

Overview:

 

The best and profitable
investment strategy is the mutual fund investment. Mutual fund is a pool of
wealth supplied by varied investors and consecutively used by mutual fund firm
to invest in different assets including stocks, shares and bonds. However, a
thorough research has to be conducted to select a mutual fund firm and only
those firms have to be considered that have certified investment manager. This
ensures the mutual funds transfer towards an ideal investment.

 

This strategy also applies for stock
market investment, where investment decisions need to taken through a detailed
research on the current and past trends of the stock market price and NAV (Net
Asset Value). Evaluation from stock market professionals about the future
prediction can also be considered otherwise profit from capital gain
distribution, dividends, and capital appreciation may not be earned.


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