All you want to know but never asked about the stocks and options markets.

jueves, 8 de enero de 2015

Investment Strategies

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There are many investment strategies, and I think none of them is ideal for everyone. Each has its advantages and disadvantages, risks and profitability targets. Each investor must choose the strategy or strategies that best suit their needs, desires and philosophy of life, depending on multiple factors. There is no need to choose a single strategy as  we can combine several strategies such as those presented here or elsewhere.

First we must distinguish between investment styles and investment strategies. The investment style you could be asssociated with the type of car and the investment strategy with the specific vehicle. When someone wants to buy a car must first decide whether to purchase a minivan, a convertible, a sports car, etc. This would be the equivalent to choose the investment style. If you decide that you want  a convertible then the next step is picking a Mercedes SLK, Porsche Boxster, BMW Z4, etc. This would be the equivalent of the investment strategy. And, as happens with cars, it is a good idea that each investor customize the chosen strategy to fit your needs and goals in the same way that a car buyer would choose, for example, certain extras, colors, engine etc.

Some of the most popular styles of investment are:
When several strategies are used it is advisable to have a separate account for each strategy so that they are clearly separated and the results can be tracked and analyzed in each case. In no case should be transferred money from the strategies that work well to the accounts with strategies producing bad results to cover losses.

The following is a list of strategies that can be used to invest in equities:

Simple strategies

  • Buy a broad index at regular time intervals
  • Buy a representative portfolio of an index at regular time intervals

Intermediate strategies

  • Buy a representative portfolio of an index by discretionary purchases
  • Buy a broad index by discretionary purchases and hold indefinitely
  • Buy a broad index by discretionary purchases and sell at some point
  • Forming a portfolio of long-term purchases at regular time intervals
  • Dogs of the Dow
  • Buy in cracks and maintain indefinitely
  • Buy in cracks and sell in medium term

Developed strategies

  • Forming a portfolio of long-term securities by discretionary purchases
  • Sell put and call options systematically
  • Buy and sell stocks at medium term
  • Buy at medium term and sell call options
  • Investing in small businesses (Small Caps)
  • Investing in cyclical companies
  • Investing in sectors using indexes
  • Investing in sectors through portfolios

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