Stocks | Shares | Mutual Funds | Forex | Bonds | Options and Futures

Stocks | Shares | Mutual Funds | Forex | Bonds | Options and Futures | Real Estate & Mortgages

Basic strategies on the market of shares

Basic strategies on the market of shares:

- A strategy of long-term retention of positions ( “buy and hold”) is a simple but effective strategy. It assumes acquisition of first-class shares (necessarily without using credit leverage!). Ideally requires opportunities of regular buying extra securities over a long period. Result (yield) increases substantially if producing “additions” in case of considerable (20 and over%%) declining market. Disadvantages are obvious - extra-long “jam” in positions is possible in case of an unsuccessful point of initial entrance;

- Strategy of investment “in index” - is a kind of previous strategy, with the shares acquired in accordance with their share of the common indexes (USA - Dow Jones, S&P500);

- Portfolio growth strategy – shares are purchased to the portfolio, having (from the point of view of manager) high growth potential. Advantage of this strategy is high profitability in a growing market;

- Strategy of aggressive portfolio management – strategy designed to yield additional profitableness, received because of manager’s professionalism. It is critical enough to behaviour of the market.

Sequence of investment actions

When investing serious amounts of money on stocks it makes sense to work out a plan of investing. We need to define the aims of investing on stocks – terms and sizes of investments, what risk is acceptable in the process of investing, expected profits. Then you can try to pick up suitable instruments for investing on stocks.

It is necessary to estimate financial instruments in terms correlation of profitability and risk - we can do this only after detailed consideration of types of instruments.

In order to reduce the risk of any adverse events associated with specific financial instrument (bankruptcy of company, defolt of the state etc.) we must strive to diversify investments – aim to invest in different markets, different industries, different companies. These attachments will make the “diversified portfolio”. Once your portfolio is formed, it is necessary to “manage the portfolio”. This means withdraw from portfolio investments that didn’t show planned profit, or instruments that didn’t meet expectations, with the acquisition of potentially profitable instruments instead.