Investment Strategy Types

With time every investor develops his/her investing philosophy regarding the type of investment strategies that are to be undertaken. This article provides an explanation of different types of investment strategies and their philosophies.

Growth Investment Strategy

Growth investing strategy includes the search of stocks that have a potential for growth. The latter means that at a certain point in time the price of the stock will rise. As a result, growth investors target young companies that have the potential of exceeding its peers in the industry or sector.

An example of such companies is the technology oriented ones that began their development during the 1990s. Now, most of these companies are prosperous leaders in the field. The investors that bet on the mere idea, which in their beginning was all that such companies were able to offer, now enjoy their profits.

However, it is important to be able to spot those companies that are to succeed. You should also keep in mind that growth investing implies risk in its nature since some of the young companies may fail in their innovative activities.

Income Investment Strategy

Income investors are characterized as the most conservative ones. The major goal of these investors is the acquisition of income. As a result they aim at companies that pay on regular basis dividends, which are of a stable and high nature. Additionally, these companies are large and well-established.

People that are most often found in this category are those that are nearing their retirement. Even though this investing philosophy does involve a degree of risk, it is still qualified as one of the most conservative.

Value Investment Strategy

The target stocks of value investment strategy are those that are undervalued by the market. This means that the price of the stock is lower than the real value of the company that has issued it.

Such stocks have been overlooked by the market in its chase after what is considered hot at the moment. In order to determine whether the stock is of a value type, most investors refer to its price to earnings ratio. If it is low, then the market is unwilling to pay more for the stock.

However, if you are a value investor make sure that there are no other reasons for the low price of the stock, such as an inner problem within the company. If there isn't such, then purchase the stock and hold it until the market recognizes its real value and corrects the price.

Finally, don't worry if you recognize yourself in more than one of these categories. With time you will become more focused and able to identify yourself with only one of the investing strategies.

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