Ultimate Guide of Best Investment Strategy for Beginners before Trading
Warren Buffet once said, “it’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price”. The buffet is known as the most successful investor and one of the richest people in the world. Investors have their own strategies when it comes to investment.
When you jump into the market, you are probably not aware of the consequences of the investment. You just want to invest so that you can have maximum profit by investing a minimum of the capital. Most people in their initial level of investment get confused about the right time for buying or selling stocks.
For example, you bought some shares in a company by investing at a fair price. After some time, you saw some profit and you sold your shares at once. That’s where you made a mistake, either you sell your shares too early while you can have more profit later on or too late while you have already lost your shares.
That’s where you need to work on proper strategies of how, when, and where you are going to invest. Investment strategies are flexible. You can choose for a business and if it seems not profitable, you can switch to another strategy. But this can cause you a heavy cost because every purchase that you make carries a bunch of fees.
Also, the assets you want to sell can create a huge capital gain, these gains are taxable which means it’s an expensive sell for you at the moment.
Best investment strategies work best for individual investors and are risk tolerance. The more you invest in a good company, the more gains you will achieve.
Investment is a push and pulls game. You will always be worried about the safety and growth of your investment. If you want to run for a short term investment then it’s obvious that you will get worried about the safety of the investment but the safety has no future potential.
Moreover, the safety of the investment is not guaranteed in any case. Because the safest investments can lose money due to the high rates of interest.
Now, you have left with the growth strategy which became necessary in today’s market. Growth has a lot of risks but it is the best strategy for long term investments. You will face the risks but in the long term, you will overcome those risks by gaining more on minimum investment.
Choosing the right strategy for your investment depends upon the ability of your understanding. We have listed some of the best strategies for you that most investors recommend.
- Value Investment
- Income Investing
- Growth Investment
- Buy and Hold Investment
- Value Investing
Value investing is the strategy of Warren Buffet, the most successful investor in the world. The value investing strategy is simple to understand. It says “Buy those stocks that are cheaper, stick to it, at the end the gains will be huge in long term basis”. This strategy is designed to buy businesses, not stocks.
Buffet explains the two key points of the strategy.
- Look at the quality of a company carefully, understand its balance sheets, communicate with the company owners, and have your full confidence in the management.
- When you have full confidence in the quality of the company that meets your future goals, evaluate the price now.
This strategy is also known as bargain shopping for investment. For example, you purchase shares cheaper from a company that is in loss and you wait till the next launch of the company’s product which will bounce back the gain over time.
Buffet has some big names in holdings i.e. Apple, Coca Cola, Bank of America, American Express, etc. These are well known huge companies. Buffet didn’t choose some small company, instead, he chose these companies so that the long term profit can be achieved.
- Income Investing
Income investing involves buying securities. It is a great way to gain profit over a period of time. The best example of Income Investing is Bonds. It is a fixed type of income securities but it also involves dividend-paying stocks, ETFs and Mutual Funds, etc. Fixed-income investment is reliable and provides minimal risks.
- Growth Investing
Growth Investment Strategy focuses on capital increase i.e. the price of the stock vs the worth of the company. Growth investor typically invests in small or large companies growth stocks. These investors believe that the company’s earning is going to be increased at an above-average rate.
Growth investors always look for the next “Big Thing” of the market. They don’t care about the price of the stocks. Growth investors evaluate the current profile of the company and its ability to grow.
Growth investors analyze the performance of the companies and their annual capital generation. Technology companies can be a good example here. These companies grow increasingly with the passage of time and their capital increase is high as compared to other companies.
- Buy and Hold Investing
This strategy is also known as position trading. Investors buy stocks and hold them for a long period of time. They believe that stocks will gradually increase in value over the long period of time.
For example, you invested $10,000 in some company stocks, and it doubles 8 times in 32 years. How much money do you have when you retire? You will approximately 2.4 million dollars at the time of your retirement. Isn’t it amazing?
Again it’s one of the best strategies of Warren Buffet. He never bought a company for short-term business. He buys the shares, holds for a long period of time which returns in a huge capital increase. Warren Buffet says “only buy something you would be perfectly willing to hold if the market shut down for ten years”.