Top 4 investing strategies investors in Canada should know

Highlights

• People generally invest their surplus money to become financially stable and to enhance their wealth for the future.

• However, all investors may not know how to navigate efficiently through investments opportunities and procedures. 

• Setting investment goals and knowing one’s risk tolerance level can help investors pursue the right investment strategy.

People generally invest their surplus money to become financially stable and to enhance their wealth for the future. When you invest money in stocks, funds, real estate properties or any such asset classes, you employ your money to do the hard work and fetch you healthy returns.

However, all investors may not know how to navigate efficiently through investments opportunities and procedures. 

As the stock market is dynamic and volatile, investors need to evolve their investment strategies in a certain way to maintain a healthy portfolio. The same for savings accounts or other investment programs may be different.

Keeping this in mind, let us explore four investment strategies that are commonly known among investors.

Also read: ETF vs Index Fund: Which is a better investment option?

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1.     Value investing 

The value investing strategy focuses on stocks that are believed to be undervalued as compared to their intrinsic value, which may be due to unfavourable market circumstances. 

Some investors explore such stocks in the hopes that they will eventually rise to match their actual value in the future when market conditions turn favourable. 

However, one should note that not all undervalued stocks can impact your returns significantly as some of them are undervalued due to their weak financials, limited business operations and other such reasons.

2.     Growth investing 

The growth investing strategy focuses on the future potential of the company. Here, investors show interest in stocks that offer significant growth prospects and business expansion in the long haul.

However, the future is uncertain for everyone, including growth companies, making it hard to evaluate their growth capabilities accurately, but that does not mean that it is impossible. 

One needs to regularly track the business performance of companies they are interested in and be aware of any red flags while pursuing this strategy to protect their money in case things go south.

3.     Momentum investing 

In momentum investing, investors actively trade in stocks to earn notable returns in a short span of time. Here, investors try to time the market and prefer to invest in stocks that are trending in the market and dump stocks that are not. 

However, active trading can be risky for newcomers and investors who do not understand market dynamics do not follow market trends.

4.     Dollar-cost averaging strategy

Dollar-cost averaging can sound like a complex strategy. However, it is a simple strategy for rookies who do not know how to time the market.

Timing the market can be a tricky concept to master, even for some experienced investors, as multiple related and unrelated factors can influence the market conditions.

Under this strategy, people engage in consistent investment practices irrespective of the prevailing market conditions. 

For instance, systematic investment plans (SIPs) require investors to invest in the funds on a monthly, quarterly or semi-annual basis. One can negate the market timing factor that could downsize investment value.

Bottom line

It is generally essential for investors to set clear investment goals and analyze their financial profile in detail to know their risk tolerance. This clarity in risk-return expectations can help them pursue the right investment strategy.

Diversification is another crucial element that can help you minimize portfolio risk.

Having a strong understanding about the different investment strategies can help investors manage their portfolios better. In times of need, they can also choose to navigate through different strategies or combine them to increase the value of their investment and avoid losses.

Also read: Which Chinese stocks to buy as we enter 2022?

It is essential to set clear investment goals and analyze one’s financial profile in detail to know their risk tolerance. This clarity in risk-return expectations will help investors pursue the right investment strategy.