Saturday, September 17, 2016

6 Investment Styles: Which Fits You ?


 Courtesy : Investopedia


Do you know what your investment style is? If you're like most investors, you probably haven't given it much thought. Yet, gaining a basic understanding of the major investment styles is one of the fastest ways to make sense out of the thousands of investments available in the market today.

The major investment styles can be broken down into three dimensions: active vs. passive management, growth vs. value investing, and small cap vs. large cap companies. Walking through each one and assessing your preferences will give you a quick idea of what investment styles fit your personality.



Active or Passive Management


In determining investment style, an investor should first consider the degree to which they believe that financial experts can create greater than normal returns.

Investors who want to have professional money managers carefully select their holdings will be interested in active management. Actively managed funds typically have a full time staff of financial researchers and portfolio managers who are constantly seeking to gain larger returns for investors. Since investors must pay for the expertise of this staff, actively managed funds typically charge higher expenses than passively managed funds.

Some investors doubt the abilities of active managers in their quest for outsized returns. This position rest primarily on empirical research shows that, over the long run, many passive funds earn better returns for their investors than do similar actively managed funds. Passively managed funds have a built-in advantage – since they do not require researchers, fund expenses are often very low. 


Growth or Value Investing

The next question investors must consider is whether they prefer to invest in fast-growing firms or underpriced industry leaders. To determine which category a company belongs to, analysts look at a set of financial metrics and use judgment to determine which label fits best.

The growth style of investing looks for firms that have high earnings growth rates, high return on equity, high profit margins and low dividend yields. The idea is that if a firm has all of these characteristics, it is often an innovator in its field and making lots of money. It is thus growing very quickly, and reinvesting most or all of its earnings to fuel continued growth in the future.

The value style of investing is focused on buying a strong firm at a good price. Thus, analysts look for a low price to earnings ratio, low price to sales ratio, and generally a higher dividend yield. The main ratios for the value style show how this style is very concerned about the price at which investors buy in.

Small Cap or Large Cap CompaniesThe final question for investors relates to their preference for investing in either small or large companies. The measurement of a company's size is called "market capitalization" or "cap" for short. Market capitalization is the number of shares of stock a company has outstanding, multiplied by the share price.

Some investors feel that small cap companies should be able to deliver better returns because they have greater opportunities for growth and are more agile. However, the potential for greater returns in small caps comes with greater risk. Among other things, smaller firms have fewer resources and often have less diversified business lines. Share prices can vary much more widely, causing large gains or large losses. Thus, investors must be comfortable with taking on this additional level of risk if they want to tap into a potential for greater returns.

More risk averse investors may find greater comfort in more dependable large cap stocks. Amongst the names of large caps, you will find many common names, such as GE, Microsoft, and Exxon Mobil. These firms have been around for a while, and have become the 500 pound gorillas in their industries. These companies may be unable to grow as quickly, since they are already so large. However, they also aren't likely to go out of business without warning. From large caps, investors can expect slightly lower returns than with small caps, but less risk, as well. 


The Bottom Line 

Investors should think carefully about where they stand on each of these three dimensions of investment style. Clearly defining the investment style that fits you will help you select investments that you will feel comfortable holding for the long term.

113 comments :

  1. V Sir,
    Is there any company doing business in cattlefeed? How do you see this sector?
    Any company mainly in cyber security area?

    ReplyDelete
  2. Dear sir, kindly provide your view on LLOYD ELECTRIC.
    Is it a decent one for investment?
    Lloyd electric is also planning to demerge consumer durables biz . it will call for a rerating and value creation. your opinion/view pls.

    ReplyDelete
    Replies
    1. Growing brand but not sure about promoter quality.

      Delete
    2. Sir, I hope you could spend few sec to clarify. This is only for learning rather than very specific to this stock.
      . If Lloyd is de merging or selling a stake of its most profitable business which is consumer durable ( AC and TV) then how are existing shareholders supposed to get benefit? Are we saying that because debt level may come down due to selling a stake and it would recall for higher valuation of existing business ( minus the consumer business)? Thank you in advance.

      Delete
  3. Dear sir
    Thanks for the useful article sir.

    Willing to know your views on HPL electric ipo.

    ReplyDelete
  4. Dear Sir,
    Kindly give your views on Marksans Pharma post correction due to UK MHRA issues?

    ReplyDelete
    Replies
    1. Already suggested to take profit and as of now not tracking it.

      Delete
  5. Dear VP sir

    Your views on DQ entertainment, Vikaseco and Cerebra. Thanks in advance

    ReplyDelete
  6. Dear Sir,
    Kindly give lights on Sri Adhikari Demeger.which is best for long term ponit of view 1.Sri Adhikari Brothers Television Network Ltd, 2.TV Vision Ltd 3.SAB Events & Governance Now Media Ltd.

    ReplyDelete
  7. dear sir please comment on magna electro casting latest quarterly result and future out look. the last quarter did well, how can it perform in the coming quarters.

    ReplyDelete
  8. VP sir the entrance jio in to Telecom is giving an indication that there is era is coming where only large players exist in an industry and others left out, reliance may become large Telecom, media and entertainment player...what u think sir

    ReplyDelete
    Replies
    1. I am not a fan of any industry which frequently need capital infusion and higher technological obsolescence.

      Delete
  9. HI sir pls share ur view on CAREER POINT LTD on longterm view at current price 107

    ReplyDelete
  10. Dear VP Sir, Pricol has published excellent Q-1, 2017 results. The price ruling near 116/. Auto stocks are gradually coming in limelight. Any view on this?? Warm regards!

    ReplyDelete
    Replies
    1. It is a decent company but faced some HR related challenges in past few years , now coming back to normalcy

      Delete
  11. Dear Valuepick Ji, Your earlier prescribed NITCO Tiles has appreciated considerably. But last quarter results were not up to expectations, possibly market was expecting turnaround results and thus got disappointed. However, the stock, after minor corrections, seems to have been maintaining its uptrend. Pl offer your comments / views what is expected. Regards!

    ReplyDelete
    Replies
    1. As per company statement 86 % of company's total debt transferred to various Asset Reconstruction Companies . With a very good brand, still I hope they can reach a settlement with ARC's easier than with Bank's . Though it may take some time , still there is hope .

      Delete
  12. Sir whats your view about aegis logistics for long term?

    ReplyDelete
    Replies
    1. This stock suggested @ Rs.125 before stock split and already turned as a ten bagger . Nothing to comment at current valuation.

      Delete
  13. Dear vp sir
    Kindly given ur view in sumeet ind

    ReplyDelete
  14. Sir , your recent views on kopran ??

    ReplyDelete
    Replies
    1. Testing patience but prefer to wait at least for few more quarters . :)

      Delete
  15. Dear Sir,

    Will amalgamation of Apollo Pipes with Amulya result in excess flkating stock? Can the price vome down as it happend in subex and pantaloon.

    Thanks

    ReplyDelete
  16. Hi VP Sir, Fiberweb India has got almost $200 million order book recently as per BSE data. Do you think they are able to continue this momentum with new orders and will they be able to translate into good bottom line growth in coming quarters. Please share your views Sir.

    ReplyDelete
  17. Dear VP Sir,
    Please tell your views on centum electronics and precision electronics
    Thanks

    ReplyDelete
  18. Hi value pick,

    What is ur view on veto switchgears...

    ReplyDelete
  19. Sir, your views on pds multinational fashion and mindteck?

    ReplyDelete
  20. Your views on (1) NBCC (2) ITC (3)Bajaj Finance in terms of ideal buying price ! Thanks !

    ReplyDelete
    Replies
    1. Adjusted to stock split ,NBCC already turned a s a 20 bagger , nothing new to comment at CMP

      Delete
  21. Hi VP Sir, I would like to know your views on Magna electro casting. Your insight will be highly appreciated sir.

    Thank you

    ReplyDelete
  22. Hi Sir.

    I Pray to god for your health and wealth of your family. May god keeps you always happy for helping small investors like us. Please advise us when to book profit in bhageria

    Thank you
    Amjad

    ReplyDelete
  23. Sir, do you track KIRLOSKAR ELECTRIC and LLOYDS ELECTRIC?

    ReplyDelete
  24. Dear vpji
    Kindly share your thoughts on Patel engg. Will be a another turnaround story .
    Looking for master views.

    ReplyDelete
    Replies
    1. Not tracking it .I think it is under SDR

      http://www.livemint.com/Companies/ekiCBtKPi7p1HfgseFmNmK/Lenders-to-take-control-of-majority-equity-in-Patel-Engineer.html

      Delete
  25. Sir, are you tracking any any co from dairy industry?

    ReplyDelete
    Replies
    1. Heritage is the only stock tracking from this sector which suggested multiple times around Rs.200

      Delete
  26. What are your views on IDBI?

    ReplyDelete
  27. Hello Sir,
    What is your opinion on old recommendation Wanbury?

    ReplyDelete
  28. VP Sir, you are positive on capital first, but its debt equity ratio is above 6. Is it Ok having high d/e ratio? Asking it for learning purpose only.
    Thank you

    ReplyDelete
    Replies
    1. That's the nature of business .raising fund and lend at higher rate is their business .

      Delete
  29. sir how you shortlisted certain stock in your tracking record and generally how much is your's observation time ??

    ReplyDelete
  30. Dear VP Sir, What is your view on "GEI Industrial Systems". Can it be bought at this point of time?

    ReplyDelete
  31. Sir, Jubilant life has gone up in the past few months. Can you pls suggest on should we hold or hav profits booked.

    ReplyDelete
  32. Dear sir,
    What's your view on V-Guard after stock split at CMP.

    Thanks

    ReplyDelete
    Replies
    1. I don't think company fundamental will change due to stock split.

      Delete
    2. This comment has been removed by the author.

      Delete
  33. Sir ur views on sree rayalaseem hypo ltd, chandra prabhu until and manappuram fin.t hanks

    ReplyDelete
  34. Sir, do you track KISAN MOULDINGS or RUTTONSHA INTERNATIONAL. Please advise. Thanks.

    ReplyDelete
    Replies
    1. Sorry, not strictly tracking any of the stocks mentioned above.

      Delete
  35. sir, your views on poddar pigments considering supportive raw materials prices and other things.

    ReplyDelete
  36. HI VP SIR i am aware you are not tracking aviation industry but your old recommendation spicejet(i know later you withdraw it) giving excellent result now a days... More over Indigo is to be included in the Nifty index from Sep 30.. do you have any opinion in aviation industry

    ReplyDelete
  37. Sir, your view on SARDA ENERGY if you are tracking please. Thanks.

    ReplyDelete
    Replies
    1. More than once ( From the level of Rs.100) mentioned as comparatively better one in Steel industry

      Delete
  38. Could you please provide your views on Piramal enterprises. ALso, I have bought Aditya Birla fashion (ABFRL) at 170 levels. Should I average at 140 levels. Many Thanks in advance.

    ReplyDelete
    Replies
    1. Not tracking PEL .

      Though ABFRL taking more time than expected earlier ,still positive on it.

      Delete
  39. Sir your opinion about Sumeet Industries.

    ReplyDelete
  40. Hi value pick,

    Your view on Cambridge technology, RPG life sciences and Ion exchange please.

    ReplyDelete
  41. Dear Sir,

    Whats your view on Intellect Design ?

    ReplyDelete
  42. Hi Vp Sir, Please share your views on "sree rayalaseema hi-strength hypo ltd". Thank You.

    ReplyDelete
  43. Dear Sir, SAMKRG Piston is back to approx 225/- Should one continue to hold or exit with 0 profit 0 loss

    ReplyDelete
  44. Sir,

    What are your views on demerger of TCI XPS and sudden fall in TCI price? Is it right time for fresh entery ?

    Thanks

    ReplyDelete
    Replies
    1. Sudden fall ? , stock price adjusted to de-merger on EX date.

      Delete
  45. Sir, long back, you said Jain Irrigation and the entire Industry is facing some challenges.

    Any change in view?

    ReplyDelete
    Replies
    1. Overseas operations showing signs of improvement.

      Delete
  46. Thank you for V2 retail again Sir. I still feel that it is still undervalued given the growth in business and future potential.

    ReplyDelete
  47. Replies
    1. Not tracking after the divestment of Caterpillar business.

      Delete
  48. Sir
    Can Atlas cycle(Haryana) be a good investment at this point after its family feud has come to end.

    ReplyDelete
  49. Are you still positive on Alps Industries ?

    ReplyDelete
  50. Sir, from the first time you mentioned Bhageria Industries in this blog, the price has multiplied 3x.

    In a comment you answered earlier you said "Dye Companies multiplied due to surge in product price. Compared with many other cos in this industry its balance sheet is far better"

    In other comment you said "Industry is cyclical. Entry and exit at the correct point of cycle is important".

    Current P/E is 23.18 and INDUSTRY P/E is 24.97

    Sir, for CMP 560. Does all the positive for the industry and company already considered in the price, or is there any more steam left?

    Thank you.

    ReplyDelete
    Replies
    1. Personally don't like company's recent decision to diversify into a totally unrelated field.

      Delete
  51. Sir your views on NANDAN DENIM.

    ReplyDelete
  52. Sir,
    Any view on Lotus chocolate?

    ReplyDelete
    Replies
    1. Sharp rise in sugar price may negatively impact the company in short term.

      Delete
  53. Hi Sir

    One of your old recommendatin Eon Electric. Can we still invest in this company for long term

    ReplyDelete
    Replies
    1. Prefer to hold for the time being and review after seeing how the business growing few quarters down the line.

      Delete
  54. Dear VP sir
    Can you please share your thoughts on Dion Global ?

    ReplyDelete
    Replies
    1. Business performance is below expectation

      Delete
  55. Dear VP Sir,
    Your views on Federal bank please?

    ReplyDelete
  56. Sir want to understand the reason behind such low interest cost in lakshmi energy for Q1 2017 despite same debt levels. Please help me resolve the query ?

    ReplyDelete
  57. Read the footnotes of last quarterly result announcement.

    ReplyDelete
  58. your views on Bharat Rasayan, it made steady growth i n both sales and RCOE in last five years. can that be equated for future also.

    ReplyDelete
    Replies
    1. Bharat Rasayan is a stock suggested @ Rs.80 which is currently trading above Rs.1600 . Neutral at CMP.

      http://value-picks.blogspot.in/2010/04/bharat-rasayan-buy.html

      Delete
  59. Dear sir, we shall appreciate your comments on RSWM.

    ReplyDelete
  60. ur view on peninsula land for long term pl

    ReplyDelete

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