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Find Your Investment Strategy

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If you would like to be successful in the stock market, you need a good plan. How to find the investment strategy that suits you.

You have decided to invest part of your assets on the stock exchange. And you’re already faced with the next question. Namely: Which securities should be in the deposit?

There are very different strategies for the selection and none is objectively the right one. Rather, it depends on which philosophy you as an investor are convinced of. Do you believe that large, internationally established corporations will continue to develop profitably, or do you rely on the growth opportunities of smaller companies? Perhaps you are also specifically picking out companies that have just survived a crisis and are now starting over. How much risk should it be and how much time do you want to spend with your investment?

The 8 most important investment strategies:

Active or passive

Do you like to rummage through company figures and deal with regional market trends and industry developments? Then you could enjoy active investing. The aim here is to select promising securities with the aim of beating the market, i.e. being smarter or at least faster than the average of all investors. Studies show that even professional investors rarely succeed in this in the long term. However, now nothing to be said against getting individual collector’s papers into the depot.

In passive investing , the motto is: choose and sit back. Provided you are satisfied with the return that the market is producing, you can also invest directly in an index. Buying the shares individually is not worth it because of the fees. ETFs map a wide variety of indices, are simply structured and inexpensive – diversification included.

Buy and hold

“Back and forth empties pockets” is one of the most common investment mistakes. There are fees for every purchase and sale. The more often you trade, the less is left of the return. Those who rely on the buy-and-hold strategy forego timing and rely instead on the long-term positive development of the stock markets. In principle, this is also a passive approach, with the difference that investors select individual stocks and not invest in an index.

Dividend strategy

With the dividend strategy, you can achieve regular income from shares regardless of the price development. Investors choose stocks with a high dividend yield. It describes the ratio of the distributed profit to the share price. Important: When making your selection, make sure that the company has regularly paid high dividends in the past.

Value or Growth

Value or growth is a question of your attitude towards risk. With the value-oriented value strategy , investors rely on companies that are fundamentally stable but undervalued on the stock market. It is therefore important to first review company key figures to find out which companies can expect appealing profits based on their market position and which at the same time have hidden price potential slumbering.

Would you prefer to rely on the growth power of young companies? Those who put together their portfolio according to the growth strategy select overvalued stocks. You can recognize this by a comparatively high price-earnings ratio (P / E). The approach is based on the conviction that future earnings growth will follow suit and adapt to stock market valuations. Growth investors speculate on tracking down the next pearls on the stock market after Amazon, Google, Facebook and Co. In addition to a feeling for the market, this strategy requires a high degree of willingness to take risks.

Procyclical or countercyclical

A positive performance in the past indicates that the stock market prices will continue to develop well. Pro-cyclical investors believe in this and choose stocks that have seen prices rise in recent months. Precisely the reverse procedure is anti-cyclical . They specifically pick out companies that have just come through a crisis and hope to benefit from the low entry prices. Constantly investing against the broad market requires great self-confidence.

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