Winning portfolio strategies for maximum returns

 

What is a portfolio?

A portfolio is the combination of stocks, funds, and market securities. In this portfolio, generally, cash and bonds are included. A diversified portfolio is a collection of variable assets, industries, and other factors.

What is portfolio management?

Have you ever seen a movie depicting a Wall Street trader? You will notice the investing idea involves chaos and activities. It's not like that. It is the process of making and managing the investment account. In your investment journey, the first step is planning your money.

You can manage your investment yourself or with a financial advisor to fulfil your financial objectives. For this, your lifestyle, goals, and preferences are needed. By identifying this, you can get greater returns with less stress. It will help you with solid financial planning, manage your daily life, and invest in a financial portfolio.

What’s meant by an investment strategy?

A financial portfolio is built up with various investment strategies, involving spreading your wealth across different sectors. These are stocks, bonds, and exchange-traded funds and more. You can decide which route to explore depending upon the following factors.

·       Risk attitude

·       Financial goals

·       Volume of investment

1) Buy and Hold

It is a passive income strategy in which you buy stocks and hold them in the long term. Those who follow this strategy have no concern for short-period fluctuations and technical analysis. Warren Buffett praises this buy-and-hold strategy, which focuses on long-term, healthy returns.

2) Market Timing

It is a market strategy that involves fluctuations in buying and selling prices. Mutual fund managers and hedge fund managers mostly use these timings. However, professional investors found it challenging to execute. Retail investors got second in portfolio performance behind Wall Street pros and analysts. You do not need to earn a degree or a fancy formula to manage your entry and exit timing.

3) Diversification

Can you guess the strategy name that combines a new product or a new market? The name of this strategy is termed diversification. This strategy involves investing in products, services, or a different market. Strategy hedges the uncertainty of the supply chain and market growth. Ansoff defined four growth strategies, and the diversification strategy is one of them.

4) Invest in Growth Sectors

This strategy involves companies that are expected to grow at an above-average rate as compared to the industry or broader markets. These companies heavily invest in their operational expansion, innovative product development, and new market share capture, so they do not generate potential profits. Their focus is on business future growth instead of paying dividends. The Growth investment approach is popular in technology and healthcare, where changing market demands and rapid innovation lead to potential financial outcomes.

5) Cost Averaging

The Cost Averaging/cost average effect/incremental averaging technique aims to assess the impact of volatility investing or purchasing financial instruments or assets.  This approach allows for injecting capital into smaller portions, making a lump-sum purchase of a financial asset or instrument. In this way, investment is divided into smaller parts, which are invested individually with planned time frames till the complete investment is made. Financial instrument unpredictability fluctuations are intrinsically present in financial markets. Dollar-cost averaging reduces risks by spreading the overall regular cost of investing.

6) Dogs of the Dow

Michael Higgins introduced the Dogs of the Dow strategy in his book. Its most attractive feature is its simplicity. In these techniques, ten out of thirty businesses selected the Dogs of the Dow, the highest dividend yield. The investor shuffles their portfolio equally among these ten stocks. This portfolio investor needs to switch his 3 to 4 stocks each year and change to different ones. The stocks are usually swapped if the dividend yield falls out of the top ten.

7) CAN SLIM

The Can-Slim strategy is a structured and systematic technique for selecting high-performing stocks. Can Slim is the abbreviation of the seven critical factors continuously found in stocks that experience high price increments.

 

Ø  C-Current Earnings Per Share (EPS) Growth: Solid earnings growth is a successful company's symbol

Ø  A-Annual Earnings Growth: Sustainable annual earnings growth gives a profitable track record

Ø  N-new services, products, or leadership: Potential changes or innovations frequently drive development

Ø  S-Supply and demand: Balance and demand can significantly affect price fluctuations

Ø  L-Laggard/ Leader: Leading stocks investments within an industry, which can give better returns

Ø  I-Institutional sponsorship: mutual funds support, and other institutions can help with stock performance

Ø  M- market direction: General market trend alignment to make sure environmental conditions are favourable for stock progress

 

8)     Passive Index Investing

This investing strategy gained popularity with index-based mutual funds during the 1970s and later with exchange-traded funds in 1993. The passive investing approach has the advantage of low turnover. Assets move in and out of the fund at a pace, with low transaction costs and realisation of capital gains, resulting in potential savings during tax filing seasons.

9) Value Investing

Value investing is the bargain shopping of the investing world. These investors' stock prices reflect the intrinsic value of the security. This approach, in part, suggests that some degree of unreasonableness exists in the market. Investors don't need to comb through volumes of financial data to obtain deals.

10 ) Momentum Investing

These investors ride the wave. They consider losers as those who consistently lose, and winners as those who consistently win. Momentum investors buy stocks during an uptrend. They believe that losers keep dropping, and their securities may be short-sold. These investors heavily rely on technical analysis. They use data-driven techniques for trade and stock price patterns to inform their purchasing decisions.

Concluding words

These are just a few of the simpler strategies for growing your money. Further approaches can be at the individual or institutional level, such as using derivatives that control the risk amount and gains.