As we all know knowledge of investing is extremely important. But the right knowledge of investing because many people invest in wrong way. People wants to invest in but didn't know the right way. There are some categories of investing that I'll deliver to you guys. You can invest by using these knowledgeable things.
So let's get started.......
1. Passive Investing
Passive investing is the term in which you invest in stocks there you want to hold for a long term. How does this happens? The advantage of passive income is you don't want to see the portfolio daily, you know that over a period of time it will grow into a wealthy and a rich preposition for you.
But the factor is how did you get that what are the stocks which gives you profit over a long period. So, you have to research, you will have to be an expert, you have to build a thesis that why you are investing in them. So it's difficult but of course it's not impossible. You can consult a screener website or any other site which is giving you company's revenue growth, profit growth and so on.
You can pick those stocks that have generated good revenue growth, profit growth, return on equity so on and so far. You will be known that which are the stable, large, healthily growing companies. So you can park your money on that companies and forget it for a long period. That will become a wonderful way for you to make money over a long period.
2. Active Investing
In this type of investing, you bet on those stocks which you know these are rapidly changing so you are invested in them over a short period of time. The day trading is most common form of active investing where you buy and sell stocks in just one day. You are betting on the price movements there are lots of active investing strategies which change weekly. So they can give you that gain in short period.
If you keep accumulating these gains over time, your return can become very healthy over a period of time. The advantage of active investing are you can make actually make sizeable returns over a long period time despite the fact that you would be buying and selling stocks almost every day.
But the disadvantages is that it's time consuming. Becoming a active trader you should work 24/7, it's a full time role. It requires a lot of research, a lot of technical understanding and the most important the time that you need to spend in active investing.
3. Growth Investing
Growth investing is the most common form of investing where you invest in the stocks of those companies which you know are riding on their growth. That is the right way to unlock unreal returns over a long period of time. Technology stocks in the US over the last 10-15 years have prospered because of growth investing.
Tesla is a great example, Tesla was unprofitable for so many years, but still, people was investing in it. Because they believed that this sector and this player have some solidity. If you keep investing in the growth not necessarily financial profitable growth, but early on just revenue growth, then it may unlock at any point and create a massive wealth creation opportunity for us.
4. Value Investing
This tells us, we should invest in a company that we think is underpriced, or it's value is lesser than it should be. Warren Buffet follows this approach, he says I want to just sit on my money and the day I will see a great company whose fundamentals are good, management is good, market Share is good, industry is good, but for some reason I'm getting it at a low price then I'll buy that.
Warren's thinking is that this strategy will give a massive profit because it's gradually and consistently try to come back to that value. The advantage of value investing is that it is very passive so you can park your money and adopt the procedure of buy it and forget it. But the disadvantages is how to find out the value because it is required an approach.
For example, a very common approach for passive investing is called free cash flow analysis, that we will access the free cash flow of the company, or at the end of the year, how much cash is generate in the business an then we will predict in the future and then try to bring it back to the present.
Don't try to get technical, but that's the way its done. If that value is more than today's stock price value that mean the company is undervalued today, so we might take a bet on it. But that's the point who has the much time, patience, knowledge and that's why value investing is while it is such a great way to money but it is the hardest way to do it. You need lot of patience in it to continue waiting for the right time to make that investment.
5. Income Investing
It's so interesting that a lot of people want to invest but it is difficult to build early on. Income investing means whatever stocks you buy will give you a regular income. Forget the fact that the stock price is might be increasing or not, but there is a regular income. In stocks, that happen through dividends.
There are lots of stocks whose stock price doesn't move rapidly, but they disclose dividends every year. This means what ever they profit earn at the end of the year, they distribute a percentage into Share holders of that company. So, the advantage of income investing is you will get income without selling your stocks. Another ways of doing it, outside of the stock market is to buy corporate bonds are those where a company asks for a loan, not from banks, but form retail investors.
You might offered by 10% rate of interest by buying their bonds and you buy that bonds and you will get a regular income which is in the form of 10% rate of interest. It's almost like you are leasing your money to the company.
These are way that you can generate your money or cash flow through your investments and that's why it's called investing strategies. You can apply these strategies and pick at your own that which is the way you can earn profit in a better way. Thank you.
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