Strategies For Making The Right Investment
Before making any investment decisions, make sure you have a solid base of sound investment strategies to draw on.
Know What Your Investment Goals Are
The results you want out of your investment should help determine the strategies you pursue. According to MSN Money Central, investing for retirement, for your child's education or for a discretionary purchase such as a vacation home will all require different timelines. They will also require a different mix of risky stocks vs. safer bonds and dependable cash in your portfolio.
Alter your strategies based on whether you need to achieve your goals in the short, medium or long term. For instance, as an author on Cash Money Life points out, he is more likely to take risks with his infant daughter's college fund than he would for a teenager's college fund.
Find the Right Vehicle for Your Investment
Do you want to take your chances with the ups and downs of the stock market, or do you want a tax-sheltered retirement plan that will grow at a predictable rate? This should be determined not only by your timeline, but by the amount of income you are able to allot to investing and the level of risk you feel comfortable assuming.
Value Investing
The value investor picks a company that is being undervalued by the current market and is likely to improve in value based on the assets it holds, according to Finance World Investment Advice. "Buy low, sell high" is the slogan of value investors.
To find an investment that gives good value, look not only at share price but at price per earnings, or P/E, ratio. Take the share price and divide it by earnings per share, so that you can contrast the company's earnings for its investors with its trading price.
Growth Investing
Growth investors care less about a company's current price than its potential for growth in the future, according to Wikipedia. As long as a company is poised to take on a much bigger market share in its industry than it currently has, it may be a smart growth investment.
According to successful investor Warren Buffet, quoted on Investopedia, "growth and value investing are joined at the hip." Since both strategies involve latching on to a company that is likely to increase in value in comparison to what investors bought it for, there may be less difference between them than proponents of each strategy claim.