Investment philosophies are set principles and beliefs that influence investors’ thinking. They are agreed-upon investing guidelines determined by your risk tolerance, expectations, time horizon, and goals. The investment philosophy thus guides your investment strategy.
An investment process is the steps an investor takes when investing. Their philosophy often guides the process, leading to predictable returns and consistency. Below we list the investment philosophies that have guided great investors to success.
Types of Investment Philosophies
You should guide an investment philosophy as the investor. Your personality, goals, capital, risk tolerance, and experience should decide how you invest.
1. Growth Investing
Growth investing is a type of philosophy where the investor looks for and invests in newer companies that are trading above average in a bid to raise their stock prices. It is a low-risk, high-reward policy. If you manage to raise the company’s stocks, you look to gain a lot of money, but in case it doesn’t work, you still maintain above-average trading returns from the company.
2. Value Investing
On the other hand, value investing influences investors to invest in undervalued stocks. The investor buys these stocks hoping that their value will rise significantly soon. It is similar to growth investing in that the investor sees these companies as unexplored markets with high potential returns.
3. Socially Responsible Investing
Socially responsible investing is a philosophy where the investor focuses on investing in companies with the same beliefs and values. This investment process is belief-based rather than profit-driven. The beliefs could be religious, environmental, or societal. The investor looks to promote these beliefs and values in society while making money.
4. Contrarian Investing
As the name suggests, this philosophy means the investor goes contrary to the masses. The investor believes that a mass decision is wrong and will always choose the exact opposite. It is a high-risk, high-reward philosophy. By going against the market, you look to maximize any potential losses. If the crowd sells their stocks, you buy those stocks, and when people are buying, you sell yours.
If the stock value drops, you will not be affected as you sold yours when on the high. When the stocks of the company you bought start to rise, you look to make significant profits. This is highly dependent on the market and is a massive risk. You should only stick to this philosophy if you are a risk-taker.
5. Technical Analysis Investing
Technical Analysis is an investment philosophy for low-risk takers. The investment process involves identifying trading activity and patterns to try and predict the best-performing companies before they start performing. It involves a lot of data mining and studying but is worth it when you get it right. You will be able to buy and sell stocks at the optimal time.
Conclusion
The investment process needs careful consideration and research lest you lose your money. All the most successful investors and investment companies have a set philosophy that influences their decision-making. They stick to that no matter the market change and always make profits.
About The Author
Nicole Hinton
Nicole is a freelancer & passionate blogger. She has 4+ years of experience in digital marketing and specialize in content writing, content marketing and organic search engine optimization. She has worked with many brands from Canada as well as the USA. Currently, she manages content marketing team of freelancers and doing their business efficiently.
