Educate Yourself in Shares before Investing

Here are 7 Important Share Strategies to learn.

  1. Learn about Potential:
    Growth investing is the idea that you should buy shares on companies whose potential for growth is excellent. Investors looking for growth tend to focus more on the value of the company as a going concern. Many of them plan to hold their stocks for a long period of time, although this is not 'set in concrete'. Eventually, if the company is not growing, obviously the investment will have to be looked at. Growth investors look at the underlying quality of the company and the level or rate in which it is growing.

  2. Check the Income:
    Many people look to buy shares primarily because of the income stream that comes through dividends. This group are called income investors. They forgo companies whose shares have the possibility of growth for those who produce high yielding dividends.

  3. Check Growth:
    GARP is an acronym for growth at a reasonable price. These investors look to combine the value and growth approaches. They look for companies that have solid growth prospects, where the current share price does not reflect the value of the business. They hope for a double-barrel return where the earnings increase and the price earning ratios at which the earnings are valued increase as well. One of the most common GARP approaches is to buy shares when the P/E ratio is lower than the rate at which the earnings per share can grow in the future.

  4. Quality of Company:
    Most investors us a hybrid-type of arrangement. They look for high quality businesses, selling for reasonable prices. They are more interested in the company’s valuation and the quality of the company as measured by the return on equity and the competence of the management. They call themselves value investors, but concentrate much more on the value of the company as an ongoing concern, rather than based on a liquidation value.

  5. Buying by the numbers:
    Buying the numbers by pure quantitative analysis. These investors look at numbers with almost no regard for the underlying business. They are always talking about numbers because their approach is purely quantitative.

  6. What about Company size:
    Some investors only invest in companies of a certain size, measured either by the market capitalisation or by its revenues. They believe that different size companies will show different returns over time, with returns being higher – the smaller the company. Others believe that revenues are a much better way to look at it.

  7. Look for Momentum:
    In momentum investors look for companies that are not doing well, but are still flying high. They look for companies that often beat the analysts’ estimates for earnings per share yet have high annual earnings and growth relative to other companies. They see this growth as a sign that things are really good for the company.

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