As more people are moving towards stock investments, it is necessary to stay aware of the popular stock investment strategies that can help them build an impressive portfolio. However, one thing to keep in mind that investing in stocks is easy due to the availability of numerous trading companies in India. But, the main question is to decide which stocks to actually pick. This is where choosing the right portfolio strategy becomes necessary.
For your reference, here are some of the promising portfolio strategies to choose from.
An aggressive portfolio is chosen to outperform profits and embrace the extra-large risks that easily accompany them.
The stocks that are suitable for this kind of portfolio usually come with a high beta, or compassion to the typical market condition. In general, high beta stocks come across major variations in price as compared to the market trends. If a stock contains a 2.0 beta, it will usually shift double as much as the usual market in any path.
Aggressive investors usually stare at businesses that are at the initial stage of their growth and feature a distinctive value proposition. However, these names are not generic.
If you want to adopt this kind of portfolio strategy, it is important that you look for companies that have been witnessing excellent growth in their revenues but not well known to the investors. Most of these companies belong to the IT sector but this is not fixed.
The Defensive Portfolio
The next popular portfolio strategy is Defensive Portfolio. The stocks under this category generally do not contain high beta as they remain separated from wider market variations.
Dissimilar from recurrent stocks, which are thoughtful to the fundamental economic business sequence, defensive stocks are known to perform well in both bull and bear market conditions. It doesn’t matter how terrible the economy is typically, these stocks are from companies that make essential products which means their demand is not likely to face a backlash.
For those looking to take up this strategy, it is recommended to search for the stocks of businesses that primarily deal in staples.
The Income Portfolio
An income portfolio takes into account the stock investments that generate returns from dividends or other kinds of perks to the investors. It is to note that you may find some stocks common in both defensive and income portfolio. The major reason is that these stocks are chosen majorly to their high returns and lowest brokerage charges.
An income portfolio is primarily supposed to guarantee positive cash flow. Some of the primary income-generating investments are Real estate investment trusts (REITs) and master limited partnerships (MLP).
These businesses give back a bigger part of their profits to shareholders in order to ensure constructive tax position. However, do remember that these stocks also depend on the economic scenario. One example is these stocks face a downturn if the market is bearish. This is when fresh construction and buying are scarce.
In such a scenario, most stock investors are recommended to search for stocks that are not much favourable but managed to give excellent dividends to the investors. These businesses have support income and enable capital profits over years. You can start with utilities and other sluggish-growth sectors.
The Speculative Portfolio
You can compare this kind of stock portfolio with gambling. This is because it comes with extreme risk levels that all other portfolio strategies described here.
The investment assets that come under the purview of this portfolio are IPOs and stocks that are envisaged to become overthrow boards. Some examples are healthcare or IT firms that are on the verge of developing an innovative product. Another example is a new oil extraction firm that is poised to product its primary production outputs. As you can see the profits in all these cases are speculative, they are known to speculative stocks.
According to stock market experts, it is recommended to use not more than 10% of your money to build a speculative portfolio.
The Hybrid Portfolio
Also known as a mixed portfolio, this portfolio includes the investment in bonds, real estate, commodities, and artwork. It is primarily known for its high level of flexibility in the sector.
Usually, a hybrid portfolio is consisted of blue-chip stocks, public and corporate bonds. It is interested to note that MLPs and REITs may also become a part of this portfolio.