nc efi placeholder

If you have set your mind to invest in a particular investment strategy, a couple of factors such as the risk and benefits attached must have informed your decision.

But before you go ahead with your decision, you should know that different fund managers have different techniques which they use to select assets. Therefore, you should examine the Investment style to know if it will align optimally with your risk and return objectives.

To diversify your investments, it is advised that you put two or more styles together in such a way that your risks and rewards are profitably balanced. On that note, you might want to carry out some online research before investing anywhere.

Here are some commonly used investment techniques you should know.

1. Dollar Cost Averaging 

This technique works well with people investing in stocks. The system involves buying a blend of expensive shares and cheap shares at fixed amounts regularly instead of investing a block amount at once.

As an investor, you are expected to buy a lot of units when shares are cheap and a few when they go up. The only snag with this technique is that it costs the investor the opportunity of earning higher returns associated with early block investments.

2. Growth investing

The growth investing technique is designed to discover companies that grow faster than others in the same industry. Such companies can be considered as growth stocks probably as a result of an increase in revenue.

Though companies with fast growth rates are prone to a higher risk of a downturn, they are known to have high returns given that they have the acumen to outdo investments with a slow growth rate.

3. Fundamental Analysis 

Several factors affect how risky or rewarding an Investment is. Fundamental analysis aims at studying these factors, either by examining the financial information of the company, or by hearing from the company staffers, suppliers, consumers, or competitors.

The aim of this is to know the source of the company’s growth before investing. Technical analysis can also help to pull this off but using both fundamental analysis and technical analysis gives the best results.

4. Value investing 

An investor using this technique aims to buy stocks underpriced by the stock market. The one criteria for making investments using this technique is if the stocks are being sold at a lower rate than their intrinsic value.

The idea is that the value of these stocks will be revealed over the years and will increase significantly in price, thereby giving the investor a wider profit margin. The investor, however, is tasked with finding such stocks that fall below market values. This technique was developed by Professor Benjamin Graham and was widely talked about in his book – The Intelligent Investor.

You should study different Investment techniques to find which suits your Investment plan. Dollar-Cost Averaging reduces risks of outright loss, value investing gives you the same quality for a lesser price, and growth investing helps you to find companies that you should be investing in.