4 Type of Investment Strategies : Pros and Cons

Investments are a vital component of one’s financial journey. At some point or the other, we all make investments. Investments in terms of time, effort and money.

Today, we will discuss financial or monetary investments. Financial investments can be done using any investment instrument like mutual funds, bonds and stocks. Stock market is one of the most sought after platforms for investment and has been a very lucrative one too. The reason for the same are the high returns which the market provides. However, it must be noted that this is also amongst the most risky investment options, if proper techniques are not followed.

There are certain strategies, which can be beneficial for every investor, right from a noob to a pro. These strategies are also certified by SEBI and are thus legal to use. You can select any one of these strategies depending on your investment style or also choose a combination of multiple strategies.

So, without further ado, let us take a look at some of the best investment strategies you can use for getting the most out of your investments.

4 Type of Investment Strategies

1. Income Investing
2. impact Investing
3. Growth Investing
4. Value Investing

1. Income Investing

Dividends can be a great option for earning. Investing in the shares which are expected to pay dividends is known as income investing. Income investing is expected to provide steady returns on a steady schedule. This is good for investors who don’t know much about investing.

Pros

• While the risk is lower, returns are decent enough.
• The dividend earned can be reinvested to earn interest.

Cons

• The capital requirement is high in order to get decent returns.
• It may take time to observe meaningful returns.

2. Impact Investing

Investing in the companies which have a positive environmental or social impact is known as impact investing. Impact investing is more aligned towards sticking to your values rather than growing your money. Impact investing is often seen as investing in a cause, which sounds more like a charity, isn’t it? Let us take a look at the pros and cons of impact investing:

Pros

• Impact investing is characterized by investing in companies reflecting their values.
• Supporting the companies which improve the world always feels good!

Cons

• Impact companies can be highly overpriced and may not have profit-booking elements
• Impact investing is more aligned towards sticking to your values rather than growing your money.

3. Growth Investing

Investing in the companies which have demonstrated a high growth rate is known as growth investing. This strategy was popularized by the great investor – Peter Lynch with his expression “invest in what you know”. It means that you should invest in companies you know are going to be valuable to make the most out of their future growth. Growth investing requires you to enter a company when its valuation is low.

Pros

• Growth investing when planned for long term can provide good returns.
• A successful growth investment strategy is more about timing rather than investing.

Cons

• It is hard to identify a potential company in its early stage.
• Considering the competition and economy, it is hard for growth companies to come by.

4. Value Investing

Investing in companies which are trading far below their actual value is known as value investing. Such companies are expected to provide decent returns in the long term when the prices hit the actual valuation. Value investors invest in companies when they are trading on discount and generate good cash flow in the long run. Value investing was the most used strategy by the great investor Warren Buffet.

Pros

• It provides the highest return of all other strategies at considerably lower risk.
• The capital requirement is low, because you are buying stocks when they are on sale.

Cons

• Patience is very important for value investing and thus it is not for everyone.
• It requires extensive knowledge and research about the companies.

Conclusion

If you are new to trading and don’t have enough experience of market trends and trading it is better to take guidance from a SEBI registered investment advisor who can guide you with the trade. There are various SEBI registered and renowned investment advisors like CapitalVia who can help you in guiding you with Intraday trading strategies by providing research-based advice and levels for intraday trading. These intraday trading strategies can be beneficial but whenever you invest or trade in the market your capital is at risk. It is always better to enter the market with proper research and guidance.

Happy Investing!