Investing right: The difference your approach can make to your portfolio
Value investing: One of the soundest approaches to investing, the value investment philosophy is both simple and profound. It is the practice of buying stocks of sound businesses at a discount to their intrinsic value. An objective approach to value investing requires investors to make their investment decisions based on business fundamentals and research.
The true test of value investing, though, comes from the fact that the strategy requires one to take absolute control of one’s emotions while investing. Behavioural biases, emotional attachment to certain investments, and overreaction to temporary news are some of the pitfalls that the value investor needs to avoid in order to emerge successful. Momentum investing: A momentum approach to investing is when asset managers invest in financial assets such as stocks, indexes, derivatives, bonds, or commodities that are on the upward trend given their strong recent performance while selling those that exhibit poor returns.
The strategy is based on the belief that the assets that have been performing well in the recent past will continue their upward momentum. The core premise of this approach is that once market trends have been established, they tend to persist for a while owing to factors such as investor psychology, herding behaviour, and information dissemination. Through this approach, asset managers can choose to follow or avoid turbulent market trends in order to take advantage of the market’s own momentum.
A momentum approach to investing can be a profitable strategy for asset managers who can identify and exploit market trends and momentum factors. Growth investing: It seems to be similar to value investing. According to Warren Buffet, growth investing and value
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