Choosing your investment strategy
Guide your investment decisions with a plan of attack
When making your investment plans, you should firstly consider your goals, timescales and attitude to risk. Then, depending on your investment knowledge and spare time, think about whether you want to be hands on (active) or hands off (passive).
Consider investing in companies that you are familiar with, since you’ll find it easier to keep track of them. If ethics and social responsibility are important to you, take a look at companies’ environmental and human rights policies.
Common investment strategies
Invest in companies which have good recent and projected growth. Look out for companies which are:
- Expanding via acquisition
- Developing new technology, products or services.
- Entering new overseas markets.
- Attractive takeover targets.
Use fundamental analysis to identify and invest in undervalued stocks. You are looking to make a profit by holding onto them until they reach their true value.
Generate a cash income by investing in companies that have a history of paying good dividends (high yield). Larger ‘blue chip’ companies are popular.
Buy and hold
Buy a stock and keep it for a long period of time, irrespective of market fluctuations. This is known as a passive investment strategy.
Benefit from a combination of growth and income. Look out for companies that pay out a proportion of their returns as dividends while retaining a certain amount for ongoing investment in pursuit of growth.