Investment Strategies

Buy and Hold #

A long-term investment strategy in which an investor buys stocks and holds onto them for an extended period of time, regardless of short-term market fluctuations. The idea behind this strategy is that over the long run, the stock market tends to go up, and by holding onto quality stocks, an investor can benefit from this upward trend.

Example: Warren Buffett is a famous proponent of the buy and hold strategy. He has held onto many of his investments, such as Coca-Cola and American Express, for decades.

Dollar-Cost Averaging #

An investment strategy in which an investor buys a fixed dollar amount of an investment at regular intervals, regardless of its price. This approach allows investors to buy more shares when prices are low and fewer shares when prices are high, potentially reducing the average cost of their investment.

Example: If an investor decides to invest $100 in a mutual fund every month, regardless of the fund’s price, they are using dollar-cost averaging.

Value Investing #

A strategy in which an investor looks for stocks that are undervalued by the market and have the potential to increase in value over time. Value investors look for stocks with a low price-to-earnings ratio, low price-to-book ratio, and high dividend yield.

Example: Benjamin Graham, the mentor of Warren Buffett, is known as the father of value investing. His book “The Intelligent Investor” lays out the principles of this investment strategy.

Growth Investing #

A strategy in which an investor looks for stocks that have the potential for above-average growth in earnings and revenue. Growth investors are willing to pay a higher price-to-earnings ratio for these stocks in anticipation of future growth.

Example: Peter Lynch, a former portfolio manager at Fidelity Investments, is known for his successful implementation of growth investing. He led the Magellan Fund to an average annual return of 29% during his tenure.