A lack of understanding is one of the biggest reasons why many people don’t succeed in the stock market. This is because with some of the terms heard in the stock market and obscure concepts like cryptocurrency, a lot of people feel alienated and, therefore, don’t invest. However, it doesn’t have to be this way as a simple explanation of some of the most popular investment techniques could go a long way in getting more people on board.
So, let’s look at some of these techniques, and you can pick out what works best for you. What’s more, these techniques are flexible, meaning that if one doesn’t work out for you, just try out another.
- Buy-and-hold investing
Investing is the concept of sinking money into something with an eye of some gain further down the road. This gain is referred to as ‘returns.’ Therefore, think of investment as shopping for something without getting it immediately. With that in mind, buy-and-hold investing is the practice of buying shares in companies that you believe will do well in the future. Hence, it requires some intensive study before putting your money into.
But, it has a couple of neat advantages like its superior returns as opposed to more active trading strategies. In addition, once the initial groundwork is done, you can relax and just watch your investment grow without the stress of regular trading.
- Momentum investing
This is similar to buying a product because all the cool kids have it. So, momentum investors tend to buy stocks that are cresting a wave, and they are in love with the winning team. Also, they follow data-driven methods and base their decisions on this. While this method has its advantages, you also need to constantly be on the lookout to ensure that your investment doesn’t go up in flames and be ready to switch at a moment’s notice.
- Growth investment
This is like buying a new product that you’re confident everyone will love once they discover it. So, it isn’t uncommon to see growth investors pitching their tents with emerging companies that offer a product that they believe is unique. Thus, they put their faith in the company’s potential.
As you can imagine, this is not an investment technique for the weak of heart; on the other hand, if the bet pays off, your investment could grow faster than established stocks. Also, some people choose to invest in companies with an impressive dividend growth rate, which is usually a reflection of how well the company is doing.
- Value investing
Value investing is a splendid investment strategy in which the investor keeps their eyes peeled for stock that might be undervalued but with strong long-term potential. This strategy has been popularized by the likes of Warren Buffet, who has made a killing using this system. But, while the value system is attractive, it also requires constant vigilance to ensure that you’re alert to any time a stock might be undervalued.
As mentioned above, these investment strategies are flexible, meaning you can use more than one for various interests or change it if it’s not to your liking.