Is It A Good Option To...
If you’re speaking to someone who calls themselves an “investor”, you are bound to hear the phrase: “Mutual Funds”. Everyone keeps talking about it, but do people really know whether...
If you’re speaking to someone who calls themselves an “investor”, you are bound to hear the phrase: “Mutual Funds”. Everyone keeps talking about it, but do people really know whether...
When you think of investments, the first thing that comes to your mind would be stocks, bonds, deposits, etc. You also think that we invest to ‘become rich in a...
Mutual Funds (MF) are trust funds managed by an Asset Management Company (AMC) with the money pooled from investors. The money is invested in assets like bonds, equities, stocks and...
Investment options for our savings are available in abundant, choosing the right one based on the investor’s objectives is crucial to minimize risks. You can choose to discuss with your...
When a person decides to invest in the financial markets, there is a plethora of options available. One can choose to invest in stocks, debt, derivatives, commercial paper, debentures and...
When you have just stepped on the income generation mode (say early 20s), you would have plans to set up milestones to ear mark each achievement. Purchase of a car,...
In our big wide world today, income can be generated quite easily. While most people work hard for years to ensure that they have enough savings when they retire, there...
Day Trading is a form of Share dealing where shares are bought and sold in a single day. The intention of a Day Trader is to make use of the...
Day Trading and Day Traders Traders who participate in day trading are called day traders. Day trading is speculation in securities, specifically buying and selling financial instruments within the same...
We might have heard about a lot of strategies of fund managers but it is difficult for a lay man to get a perfect picture of what it is. So...
We might have heard about a lot of strategies of fund managers but it is difficult for a lay man to get a perfect picture of what it is. So here are the common investment strategies of fund managers for a common man to understand.
Top-Down Investment
When the economy is doing well or growing very well the fund manager might buy the stocks which he/she thinks will do will when economy is performing well. For example any industrial sector or transport sector sectors do well during progress of the economy. Hence such stocks are bought. On the contrary if the economy is not doing good such stocks are sold. This is the Top Down approach.
Top Down = Good market = Buy stocks
Or
Top Down = Bad market= Sell stocks
Bottom-Up Investment
Unlike the top down investment here the manager buys or sells the stock of the company based on the company’s progress and not the economy.
Bottom Up = Progressive Company = Buy Stock
Or
Bottom Up = Regressive Company = Sell Stock
Fundamental Analysis
Here the manager scrutinises a company’s management by meeting various people associated with the company. They also analyse their market and key for potential growth. They also use analyse financial statements like PE Ratio, ROE Ratio, etc and arrive at a decision based on combination of all these factors.
Fundamental Analysis = Company analysis = Potential Growth = Buy
Or
Fundamental Analysis = Company analysis = No growth/ loss = Sell
Technical Analysis
Here also the company is scrutinised but just through technical analysis like charting or focussing on their history trading pattern or by predicting a direction for future share price or by analysing the asset value of the company.
Technical Analysis = Charting = Growth trend/Pattern = Buy
Or
Technical Analysis = Charting = No growth trend/ Pattern = Sell
Contrarian Investing
Here they choose assets that are out of favour. It means buying assets that are underpriced relative to their full or intrinsic value while the rest of the market is selling. They buy these stocks with the expectation that the gap between share price and intrinsic value of the stock will converge at some future point.
Contrarian Investing = Rest of the Market Selling the Stock = Buy the Underpriced Stock
Dividend Investing
Dividend funds buy stock with good record of earnings and dividends. They buy such stocks to take advantage of the steady payments and the opportunity to reinvest dividends to purchase additional shares of the stock. Most of such companies are considered financially stable and hence the stock prices of such companies may steadily increase over a period of time while the shareholders enjoy periodic dividends.
Dividend Investing = Companies with high yield of earnings and dividend = Buy
These were a few common strategies followed by the fund managers in order to buy or sell stocks. These managers could follow a combination of all the above strategies to buy different kinds of stock or just stick to one style based on their experiences and exposure. However it is always advisable to follow a balanced way to gain higher profits and to play safe.
Liked this article on Common Investment Strategies For Fund Managers and have something to say? Comment below and don’t forget to SHARE THIS ARTICLE!