Step 2: Decide what type of investor you want to be
Examples of investment strategies
Here are some common investment strategies when it comes to buying equities:
Think of value investors as bargain hunters. They look for good companies that are currently underpriced by the market, specifically companies that are trading at lower multiples (multiples are investment ratios such as your P/E ratio) than industry and historical averages. Value investors will then profit by selling their shares at a higher price once the valuation of the company returns to its expected levels.
Remember to do your research. Value investing involves looking for companies that are undervalued, not simply companies that are cheap.
Growth investors look for companies that have very strong future growth prospects. They are more willing to pay higher prices and give up dividends in exchange for owning stocks in companies that are reinvesting their profits to fund future growth. The growth investor profits by owning more valuable stocks in a company which has grown considerably as compared to when he first invested in it.
Yield investors look for companies that have high dividend payouts. They profit by receiving steady dividend payments from their shares in addition to making gains from any capital appreciation. Here are some examples of dividend stocks listed on Bursa.
The benefit of this approach is that it allows you to get steady returns on your investment regularly and it doesn’t require much capital to get started.