Investment Management



Investment Strategy

Introduction

The investor who wants to invest money in the stock market i.e. in shares, he makes a portfolio where he select certain stocks in order to diversify the investment. The main purpose is to avoid risk and to look for higher returns. The stronger the wind, the faster the sail moves. In the stock market, the more volatile the stock fund, the higher the potential for growth and loss. A skilled navigator can go through adverse weather and maybe even faster progress towards the goal. However, a good sailor knows when to change direction and when to lower the sails and take the helm. A skilled investor is like a good sailor.

The investment strategy is a set of methods and tools for portfolio management. The purpose of its application is increasing the capital of the investor.

Currently market comprises of five major investment strategies. Nevertheless, it should be noted that it depends on the investor how much risk he can bear and what is the objective when he is entering in to the market. I have been given £20,000 to invest on behalf of a friend who is going to work abroad for 2 years. I will be investing this money in the shares namely Gulf keystone petroleum ltd - £5000, Morrison's - £5000, First Group- £5000 and National grid- £5000. Hence, Equity Portfolios strategy are structured and monitored on an ongoing basis.

Discussion

Observing the behaviour of investors on the Securities Market, we can see a permanent, recurring tasks performed by many of them. They are so called investment styles that characterize the different types of investor psychology. On the basis of different types of stock market players can distinguish some of the most popular investment strategies in the stock market (Bruce I. & Kenneth N., 2006, pp. 45).

Active strategy

As the aim of the investor is capital accumulation and moderate risk is acceptable with the 2 years of time duration, for this we will select an active strategy. In this strategy investor buys and sells the securities on an ongoing base. As the purpose is the capital accumulation, active strategy seeks to sell the shares when prices are increases and buy when prices are down for the maximum profit. Note that the portfolio is constructed in a way to diversify the risk, as well not only to maximize the profit.

At this strategy investor open predominantly short and medium term position, and can withdraw money from circulation partially or completely in almost any given time. Moreover, the active strategy involves on the one hand tighter control on current risks by limiting the amount of losses in each transaction. Nevertheless, it allows you to increase profits, and consequently increase the risk of using credit facilities of the broker (www.planview.com).

Consider the features and rules of the strategy

First, the active strategy involves working primarily with the “blue chips”, i.e. with the most liquid stocks of London stock market. The second most important factor is that the active investor has the opportunity to work ...