INVESTING STYLES

There are a number of styles for Listed Equity stock investing.
Their followers vouch for the effectiveness of their respective styles.


So how do you know which style is good? 

Broadly Listed Equity Stock investing can be classified into 

1. Technical Analysis 
2. Fundamental Analysis

Technical Analysis :  Technical Analysis is generally suitable for traders to make quick returns in the market.  Its is not only complex but also requires the use of expensive upto date softwares ( for best results) and its track record to create wealth is not that impressive.

Fundamental Analysis : Fundamental Analysis attempts to measure a security/stock's intrinsic value by examining the related economic factors. These factors can be qualitative and quantitative in nature. It also entails studying the companies financial details.

Fundamental Analysis itself can be further divided into many.  The most popular amongst the many are 

1. Value Investment Style 
2. Growth Investment Styles  

Value Investing :  Value Investing is about spotting companies which are available at a bargain.  Value companies are available at less than their intrinsic worth.  Why will this be so? Well that's because stock markets generally chase fashion of the day.  The stock or sectors which are out of fashion are generally ignored by the market,  Their could be other reasons e.g. change in policy matters, global economic cycles etc.  sometimes render a sector out of favour and within the sector the stock price of a  good profitable cash generating growing business is available at a bargain.

Value investing is also safer as you tend to buy stocks which are available cheaper and are likely to fall less of the market itself was to fall.  When markets fall expensive stocks generally tend to fall more. 

Value investing is a long term investing as the realisation of value happens over the long term.  

This is why you should have a horizon of five years - when you are investing into stocks. 

Growth Investing : Growth investing is to invest into companies that have ample room to grow and expand.  Such companies generally belong to sectors which are booming. 

Is it possible to get a stock which is from a booming sector and is available at a bargain?  Well if you are able to spot a stock like this and the company's financials are good and management is very good then your chances of making suer-normal returns are very high. Easier said than done!

Some of the key financial statements and ratios which are used in fundamental investing are 

1. Balance Sheet 
2. Profit and Loss statements 
3. Cash Flow statements
4. Debt to Equity Ratio
5. Return on Networth 
6. Operating Margin 
7. Revenue and Revenue growth 
8. EPS - Earnings Per Share 
9. EPS growth 
10. P/E ( Price to Equity) Ratio