Experts' Corner

guru forex ask

A good compromise is one where everybody makes a contribution.

  • Anton Luyten
  • Posted Articles: 13
  • Last Posted: 2017-06-28 08:35:07
    • Guru StarsGuru StarsGuru StarsGuru StarsGuru Stars

What Kind of Investor Are You?

2015-09-04 08:55:59

You are now a full-fledged investor. But you have not assessed your investment style, have you? To make the most out of your trading experience, one needs to know what type of investor he or she is, as well as studying the investment styles commonly found in the market.


There are two types of management styles: active management and passive management. You prefer active management if you opt to hire professional money managers to choose holdings carefully. Normally, actively managed funds have full time researchers and portfolio managers constantly seeking to generate outsized returns for investors. The money managers charge higher fees than passively managed funds to compensate their staff.


On the other hand, some of you rely on passive funds as you doubt the capacities of active managers to gain larger returns. Such funds charge lower expenses since the group do not require researchers.


Next, find out if you desire to invest in fast-growing or underpriced companies. The growth style of investing seeks companies with high earnings growth rates, profit margins, and return on equity, and also low dividend yields. In essence, if a company possesses all of these traits, that entity is considered a game changer in its industry, grows very quickly, earns lots of money, and reinvest most or all of its revenues for future expansion.


The value style of investing ventures on strong companies at a good price. These are firms with low price to earnings ratio and price to sales ratio. They also pay higher dividend yield. Basically, this investment style is concerned about the price at which investors buy in.


Lastly, figure out if you want to invest in small or large firms. The company’s size is gauged by looking at its market capitalization or market cap. It refers to the total market value of all the firm’s outstanding shares.


Investors who select small cap firms believe they can deliver better returns since these companies are more agile and present greater opportunities. However, the likelihood of higher returns in small caps comes with greater peril. Small companies have fewer resources and frequently have less diversified businesses. Also, share prices can differ more widely.


Aggressive investors find refuge in large cap stocks. Such corporations have been around for a long time and made their mark in their respective industries. Although the firms may not be able to grow as quickly due to their market cap, they are not likely to stumble without proper warning. Large caps are not that risky, but accrue modestly lower returns.


Knowing your investment style, based on the explanations above, will help you pick the investments wisely.