REVISITING SIX INVESTMENT TECHNIQUES
Whether you have no inkling what your investment style is or you want a quick refresher, let us revisit the six common techniques.
Active or Passive Management. In terms of asset management, there are two types of investment style. Active management are chosen by investors who hire a money manager to pick the portfolio holdings on their behalf. Actively managed funds may be comprised of an individual or a group of managers. These professionals charge higher fees than passively managed funds.
Active management promises greater returns. But empirical research shows that majority of passively managed funds generate better earnings in the long run. Unlike active funds, passive funds need not a team of researchers and expenses are minimal.
Growth or Value Investing. Are you into much coveted fast-growing companies or renowned industry leaders? If you are looking for firms which boast high return on equity, high growth rates, and low dividend yields, you prefer growth investing. For companies that hold all of these traits, they are often considered innovators and income-generators. Not to mention they expand swifty and invest most or all its revenues to sustain growth in the future.
If you are searching for entities with higher dividend yield, low price to earnings ratio, and low price to sales ratio, you want value investing. This technique, concentrating on purchasing a strong company at a reasonable price, is concerned on the price that investors takes in.
Large Cap or Small Cap Firms. Market capitalization is the primary consideration for this style, which is determined by getting the number of outstanding stocks of a company and multiply it by the current share price. Conventional investors desire small cap firms, believing they are agile and can deliver higher returns. However, small cap companies have less diversified businesses and fewer resources.
Conversely, large cap stocks can render security to more risk averse investors. These are entities that have been in existence for a long while, signifying the imprint they have left in the industry that they belong. Most large companies do not grow quickly, given they are already huge. Although they generate lower returns than small caps, they pose less risk.
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