Tuesday 27 April 2021
Here are 3 key concepts, 2 key resources, and 1 key action, to help you understand investing styles.
In last week’s email we discussed what an investing style is, and the difference between active and passive. If you’re passive – that decision is easy – buy and hold market indexes, managed funds or broad thematic ETFs. If you’re active then there is plenty of choice about different styles.
Below are a few of the more common – see if you can pick what they are. Answers in the next section.
1. What investing style am I?
- I am looking for companies that are disrupting industries or are in industries that are growing quickly
- Price isn’t too important because I think my investments will grow for years or hopefully decades to come
- A lot of the time the companies I invest in are not profitable, and I’m okay with that
- The metrics I care most about are revenue growth and profit growth
2. What investing style am I?
- I am looking for companies with strong cash flow or profit
- I care a lot about the price I pay for an investment
- Growth isn’t that important to me, if a company doesn’t grow its profit but I can buy the profits it does make at a good price, then I’m happy
- I am looking for companies that I can buy for a discount to the profits they will make in the coming years
3. What investing style am I?
- My #1 investing tool is charts
- I look to time to buy and sell decisions based on what patterns are appearing on charts
- I think that charts give me an insight into investor psychology. I’m looking for key resistance levels – when a share price hits a certain level, I think investors are willing to buy back in or if it hits a certain height, investors will sell out
- Some of the key indicators I look for on charts include: cup and handle pattern, a tower bottom or a morning doji star
- Trying to find what type of investor you might be? Take this short quiz, and this one, to find out.
- It’s more than likely you’ve heard of growth or value investing. They’re two very common styles. Growth investing is a popular choice for beginners who want to pick individual stocks. Here’s a guide to growth investing, to help you get started.
Answers to ‘What investing styles am I?’:
1. Growth investing
2. Value investing
3. Technical analysis
Your investing style will dictate the types of stocks and investments you will make. Have a look at this list of value and growth ETFs to get a sense of what stocks fall under each investing style.
To do this, click on either ‘growth’ or ‘value’ > click on one of the ETFs > click on ‘holdings’ on the left hand side
Community Call Out
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