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Investing Styles

Maverick
Written by Maverick. Posted in Stock Markets on 10 April 2009.
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The two different styles of investing in the stock markets.
  • "Be Safe" mechanism: in which we put our money in the blue chip and other big companies, like ITC, SBI, Reliance, ONGC etc which will produces the constant annual returns in the long term (Please ignore the exceptions like the current economic turmoil, which may last of some more time but is not permanent. Long term means over 3-5 years and can be as many as 10 or more years depending on your needs). The income from these companies vary anywhere from 15% to nearly 30% in long term. And mainly, the risk will be lower (25%-50%). Most of the Indian investors choose this method by satisfying with them minimum returns.

  • "Be Aggressive" mechanism: in which we put our money in the small cap and mid cap companies which are having the high risk profile of 50%-90%. These companies will produce the returns of 50%-1000%. The multi-bagger companies are the outcome of only small cap and mid cap companies only. Few of the Indian investors who can bear such a high risk profile will invest in this kind of companies.
Investors who can sustain such risk of up to 75% can choose the possible future Multibagger companies and invest part of their investment. When you invest (I am talking about the investment and not the trading, i.e. the long term investment only) in a company, you should prepare and can sustain the loss of 50% also. But this depends on the time of investment. The right multibagger company can be found only when the markets are in their starting stages and if you invest when the markets are at their peaks, you may loose more money if something goes wrong. So always keep enough money for the future opportunities.

The investment in such companies should be be anywhere in between 40%-75% of the total investment in stocks based on the risk taking nature & ability (Income sources, fixed income, assets etc.) to get the better results and not more than that.

And again, it is better the total investment in the stocks & mutual funds not to cross 75% of the total investment. Rest can be put in safe methods such as Bonds, Fixed deposits etc. This kind of planning investment would help anyone in their future and have the blend of both Be Safe and Be Aggressive returns.

Maverick

Author: Maverick

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