Investment strategies
Investment strategy is a set of methods and tools of portfolio management. The purpose of its application is the augmentation of the capital of the investor.
Today, in the market there are five basic formed investment strategies. But it should be noted that often the competent investors combine several types of strategies. Discover the essence of each of the 5 major.
1. Dividends
This technique, which, in the recent enormous popularity, implies the acquisition of shares with the purpose of obtaining per cent of the profits of enterprises. To enter in the composition of the owners, it is necessary to be the owner of the shares prior to the closing, or in the moment of closing of the register of shareholders. At the present time, invested the money in a profitable venture you can get a relatively stable average income according to the results of annual work. In this case, there are two types of shares: common and preferred. The last win in that they give the most stable income, so as not depend on the financial position and profitability of the enterprise, and represent only a certain amount or percentage of the net profit.
2. Long-term ownership of shares
Investors working on the stock market according to the scheme of long-term investment, reduce their risks of buying the shares for a period of not less than 1 year. Optimization of risks is for two reasons: firstly, such a strategy allows you to distribute the shares among the various, independent from each other sectors of the economy, thus reducing the possibility of losses as a result of the industry crisis. Secondly, with such a strategy the investor is not exposed to the risk of short-term fall of the price of the shares, while the long-term price dynamics plays an important role. This strategy is also attractive because that it is characterized by the high level of profitability (around 50% per annum and several hundred percent with the period of an investment of over 1 year). The main difficulty of this strategy is the competent forecasting in the formation of a portfolio of shares, this is usually a long-term investment portfolio consists of 5-10 shares for each enterprise. A typical example of a long
-term investment is the index investing. Index investing is one of the most technically simple strategies. This technique lies in the fact that the investor sends its portfolio in accordance with the index of stock market returns or its industry, and the yield is directly proportional to the dynamics of this index.
3. Medium-term holding of shares
The strategy of the medium-term investment are of particular relevance in the stock markets of the CIS in connection with the unstable character of the latter. This is due to the fact that by choosing this strategy, the investor has a share a few months and earns on price fluctuations. That is, buying shares at a minimum price, the investor sells them in the period of the price spike. But the difficulty lies in the fact that this technique requires the trader the ability of the fundamental analysis and diagnostics of the market situation, careful of her forecasting, as well as rapid response to changes in quotations. The yield of such a technique with careful planning of the portfolio may exceed 100%.
4. Way trend trading
This investment method implies that the investor may, without closing the position, hold the shares of a few days, while there is a stable situation on the stock market. Such a strategy is the clearest proof that the higher the planned yield of the shares (and the way trade allows you to «lift» from 100 to 400%), the more time and effort investor should invest on the stock analysis and close monitoring of hourly situation on the market. In addition, the way a trend trading requires not only special of education, but also a decent experience of the «game».
5. Intraday trading ("Intrada")
Such an investment strategy is the most dynamic method of exchange trade. Players in this case receive income as a result of small fluctuations in the price of the shares during a single trading session. For one exchange session, which is otherwise called the «day trading», traders can make up to several tens of transactions of purchase and sale of the shares. Such speculative method is a highly profitable, but requires an extreme degree of concentration, mindfulness, and extremely rapid response. In addition, at the end of the working of the exchange session is a fixing of profits traders to avoid sharp price fluctuations. The greater the number of securities simultaneously can operate trader, having to keep track of price fluctuations and to carry out the transaction, the higher is estimated its exchange's potential. But due to the limitations of human possibilities, this number is usually no more than three. To the varieties of “in-day” trade include the margin trading and scalping. Margin trading is a spe
culative operations, in the course of which a trader uses the borrowed funds broker (the so-called «margin»), are provided as collateral of the loan. Scalping is low-yield trading, in which the position is opened and is eliminated in a matter of minutes or even seconds.
