All advanced investors start from being the beginners and has accumulated certain set of experiences. They have their own preferences in selecting their investments. A serious investor often committed to their investment objectives and financial goals. As such, depending on your investment horizon, different kind of investment strategy will works well with certain investors. What kind of an investor are you?
There are 3 investment strategies that we think all beginners must know:
DIVIDEND INVESTING
When you invest into stocks, most often you are attracted to its dividend payment. Most elderly people will share with you which stocks pay the most dividends and which are not. Well, this is true. With dividend payment received, your investment will grow.
The companies that pay regular dividends are financially stable. They are considered as companies with strong cash flow and good business.
Dividend investing is the first strategy that all beginners must know. It is easier to understand. Dividend paying companies tends to be less volatile and more attractive. It also means lower risk to the investors. For those investors who like a steady cash flow from their investment, dividend investing is suitable to them, and the dividends can be reinvested to buy more shares.
Although dividends are not guaranteed, company will want to ensure that it is able to continue paying dividends to keep their investors happy. When investors are happy, they will invest more. When stock prices appreciate over time, the company will usually choose to increase their dividends as well.
GROWTH INVESTING
If your investment goals is capital gain, then you will like growth investing. Investors who are interested in growth investing prefer companies to have their earnings grow at a higher rate compared to other companies. It also means a higher capital growth for their investments.
The smaller companies with strong revenue growth are usually the faster growing companies. Investors also like to invest in those companies in the emerging markets for the same reason.
Growth investors will study the company’s past financial performance and to do a comparison on how these companies performed compared to other companies in the industry. They will look at the overall cost management, business model and revenue growth of the companies.
VALUE INVESTING
Value investing is basically means looking for quality stocks that are undervalued. Investors have to compare the current share price to the intrinsic value of the company. Value investing requires more studies and research to be done, which include analysing the financial reports of the companies, to observe its earnings, dividend payment trend, cash flows, asset, debts etc.
Sometimes, the share price of a company dropped for some reasons. You should not buy the stock just because it is cheap. While you analyse the company’s financial reports, do some Google search for news pertaining to the company, in order to make an informed decision.
If you are confident that the company’s fundamental is strong, and there is a drop of the stock price, you would be buying it for a great bargain.