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Passive investing |
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Passive investingPutting money into a profitable business opportunity that is deemed passive by the IRS and thus benefits from tax deductions.Passive investing Similar MatchesGraham and Dodd method of investingGraham and Dodd method of investingAn investment strategy based on security analysis and identification. Investors buy stocks with undervalued assets speculating that these assets will appreciate to their true value. Formula investingFormula investingA formula-based investment technique in which investment decisions are made using predetermined timing or asset allocation models, e.g., dollar cost averaging. Growth investingGrowth investingThe approach to investing which aims to invest in fast-growing companies which are rapidly increasing their turnover and profits, and where the expectation is to make money from a rising share price (rather than income).The theory with a growth share is that the share price rise happens in two ways:firstly, through the multiplication of a static P/E on rising earnings per share. So a company on a P/E of 7 with earnings of 10p per share has a share price of 70p. If EPS rises to 15p, its share price rises to 105p.secondly, by a re-rating of the company's P/E multiple. In the case of the company above the earnings of 105p may be accompanied by a rise in P/E ratio from 7 to 10, in which case the share price rises to 150p.Growth investing is often contrasted with value investing. The traditional view is that:value investors look for shares that are cheap in relation to the net asset value of a companygrowth investors are only interested in earnings growthIn fact, there is common ground between the two. Value investors are very interested in earnings if they can acquire them cheaply enough (i.e. on a low P/E), and growth investors don't completely ignore things like company debt and balance sheet ratios.Nevertheless, there is an important underlying distinction between the methods:value investing is based entirely or mainly on quantitative criteria (numbers): on asset values, on cash flow, and on discounted future earnings.growth investing is based on qualitative criteria: on value judgements about the business, its markets, its management, and its ability to extract future earnings growth from its industry. Contrarian investingContrarian investingIgnoring market trends by buying securities that the investor considers undervalued and out of favor with other investors. Value investingValue investingIn the context of asset management, mutual funds, and hedge funds, the a style of investment that focuses on securities with low price to earnings ratios or low price to book ratios. Some of these securities are deemed cheap and are viewed by manager as having a lot of profit potential. Further Suggestionsvalue investingCoattail investing |
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