Friday, January 22, 2016

Aggressive Investment Strategy

Of late, I have received several requests from investors seeking help with their investment portfolios. Earlier, such requests used to come when the stock market was nearing a bull market top.

This time it has been different. The market is at the tail-end of a 10 months long bear phase. The timing is much more appropriate for building or modifying an existing portfolio.

It clearly shows that small investors are becoming more savvy about when to buy. One of the reasons for starting this blog was to highlight the fact that 'when to buy' is just as important as 'what to buy'.

Without analysing the fundamentals of a company, buying its stock is like shooting in the dark. Chances of missing are far greater. But choosing the right stock is not enough if you buy it just before, or just after, it enters a correction. That is where technical analysis can help.

Even before you start fundamental analysis of a company, or technical analysis of its stock price, there are important decisions to be made. Like, what do you wish to achieve by investing in stocks? Make some quick money to buy the latest iPhone or put a deposit on a new car? 

Or, would you prefer to build wealth for the long-term - using stocks as an asset class that can generate risky but inflation-beating returns?

In other words, you need to make a plan. First, a financial plan to fund your long-term goals and commitments. Then an Asset Allocation plan based on your risk tolerance to achieve those goals.

If you are in your 20s or 30s and earning good money with decent savings, you can afford to be aggressive about your investment strategy. 

Being aggressive doesn't mean buying 10000 shares of a penny stock and selling it for a Rs 2 gain after a month. That is being foolish - because the penny stock can just as well go down by Rs 2.

To learn more about aggressive investment strategies, read this article.

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