The 5 Investment Methods You Need to Know As a Stock Investor
The stock market is perceived as a haunted forest by rookie investors that have heard the dark tales of many an enterprising investor walk into it and never make it back. Fortunately, this forest feels more like home the deeper you venture into it and you can turn into an investment guru if you take the right approach to investing as early as possible.
The Singapore stock market presents a thriving range of companies to put your in and dozens of investment methodologies to adopt that produce the results you desire.
In the world of stock investment, there is no singular end-all solution to guaranteed financial prosperity. There are two prime factors that influence the decision making of investors:
- The investment timeline
- Financial objectives
Some Singaporeans dream of retiring at 40 as multi-millionaires and are willing to play the high stakes game in trading shares; whereas, some people just want to earn a modest yet reliable passive income that will be dedicated to paying off their child’s education expenses.
Depending on your means and necessities, you can choose between 5 tried-and-tested investment strategies in the stock market that are as follows:
Slow and Steady Wins the Race
If you are seeking a highly stable low-risk stock portfolio, then this method is perfectly suited to your needs. Although you may not turn out to be a high roller with a penthouse and supercar if you adopt this strategy, it provides one of the most reliable returns on your investment.
Investors that engage in this practice of stock investment primarily hold blue chip stocks and investment grade bonds in their portfolio. Hunting down blue chip stocks isn’t much of a task since there are only 30 companies out of 800 listed companies that are categorized under the blue chip class.
Ideal for – Young investors with investment horizons of 20-30 years; ideal for financing educational funds or home loan down payments down the line.
Chasing Capital Appreciation
Growth investment is the weapon of choice for those who are ready to devote themselves as active traders. Their primary objective is to make calculated profits by actively monitoring the market and pressing the buy or sell trigger in a heartbeat.
Despite being volatile in nature, small-cap stocks are a popular choice of investment for such investors as they exhibit promising signs of growth early on. This is because growth investors bank on their volatility and sell as soon as the volatility tips the scales in their favor without wasting any time.
Ideal for – Although it promises high returns on paper, growth investment is not recommended for rookies as one requires significant analytical prowess to make accurate growth predictions. Unless you are a field expert or have credible research to vouch for your choice of stock, it is dangerous to pump your money into small-cap companies.
Value investors believe that sometimes…. just sometimes… the market gets its prices wrong.
Value investors are essentially wily scavengers of the stock market that go about hunting undervalued stocks to find the diamonds in the rough. These usually turn out to be stocks that are not aptly valued by the market despite the promising growth potential they offer. Value investors assess a company’s potential by not just its trading records, but its workforce talent, business protocols and marketing strategies.
For value investors, the lower the stock’s market price is below its intrinsic value, the stronger the safety net proves to be for their stock investment.
Ideal for – Detail-oriented and meticulous investors willing to put in extensive hours of research of company performance reports; solid business evaluation skills are a must for such individuals to succeed using this approach.
The Gambler’s Chance
This high-risk, high reward avenue is only recommended for investors that can afford to strive for supplementary financial objectives without putting their essential savings at risk.
Investors who partake in this make a glorified gamble of sorts by purchasing penny stocks in bulk with the hope that those companies will emerge as big success stories in the market.
Ideal for – High stakes investors that can afford to let their portfolio take a minor hit or two.
Calling in Reinforcements
When your wits are weary and time is running out, there is no shame in turning to professional fund managers and asset management consultancies to polish your portfolio using their expertise.
These agencies typically charge a fixed percentage cut from your investment returns as their management fees. It gives the experts with the statistical tools and industry information to leverage their decisions and provide you a healthy stream of passive income. On the flip side, investors first have to be knowledgeable enough to correctly assess the credibility of their fund manager.
Ideal for – Investors with low to medium-risk appetites who have neither the analytical skills to make the right stock investment choices, nor the time to pick up the skills required to do so.
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