Earning a monthly salary throughout your life can keep you financially secure but cannot get you to be financially free. The best way to build wealth and also attain financial freedom is by investing the money you have earned or saved up. While investing can help you build wealth, it is also essential to make sure that you invest right. The first step is to learn the fundamentals of the stock market and pick good stocks.
There are several strategies that are commonly used by many investors to pick good stocks as well as time the market right. While these strategies may be overused, there are several other not so popular strategies that can be equally efficient. In this article, we will have a look at some of the uncommon investment strategies. Before we dive into that, let us have a look at the basics of investing.
Investing essentially means, buying a certain number of shares in a particular company and holding them for a certain period of time. This period of time could vary depending on your financial capability, your plan, and other aspects. One of the fundamental aspects of investment comes down to picking the right stock option. While choosing a company, it is essential to understand its fundamental background and then buy shares in the company. For instance, it can help to check for the revenue of the company, its financial consistency, the growth of the industry that the company operated in, etc.
In addition to research, it is also important to time the market right and buy a suitable number of shares. There are plenty of investment strategies that you can follow to be a successful investor. Let us now have a look into some of the uncommon investment strategies that can up your investment game.
5 Uncommon Investment Strategies
There are plenty of common investment strategies in the market such as fundamental analysis and technical analysis. However, if you are looking for a deeper insight into the financial market, you can use other investment strategies to potentially gain profits. Let us have a look at some of them.
1. Investing in IPOs
Initial Public Offerings (IPOs) are essentially the first offerings that are made public by any company. These IPOs attract plenty of investors and potentially offer high profits. For instance, when Happiest Minds Technologies Ltd. announced its IPO, it sold its share at an issue price of ₹166. This IPO was subscribed 351.46 times thereby providing great profits to investors. Finally, Happiest Minds ended up having a higher price by 123.49% on its listing day.
Similarly, Route mobile, a cloud communications company, also has a very successful IPO. Between September 9 and 11, this IPO was subscribed 73.3 times. During the listing date, the share price of this company increased by 86%. Therefore, investing in IPOs can be a great investment strategy to make short-term gains.
2. The Averaging Method
“Averaging down” is a very popular method that is used by investors in the stock market. Essentially, this concept is all about buying more shares of a particular stock that you have previously purchased but has declined in value. In doing so, you would average out the losses that you have incurred and are more likely to make profits in the near future. For instance, consider that you bought a share at ₹500 and over the course of a few months, the share price fell to ₹440. Using the “average down” method, you would buy shares at the price of ₹440 to minimize your losses.
In contrast, the “average up” method works effectively too. In this case, you would buy more shares of a stock if your previously bought shares have increased in price. Let us consider the same example where you buy shares of a particular company worth ₹500. In this scenario, let us assume that the share price increased to ₹600. You would then buy more shares at the price of ₹600 to increase your profits.
3. Cut Your Risks and Losses
It is always the best idea to minimize your risk as well as your exposure in situations of a volatile market. You can easily do this by setting a stop-loss limit at a certain price point. For instance, if you buy shares from a particular company at ₹400, then you can set a stop-loss at ₹390. So, in case the value of this share drops drastically, you would automatically be taken out at the level of ₹390. This would help you minimize risks and avoid huge losses. Especially in volatile markets, the fluctuations in the price range can be excessive. In such cases, it is best to stay precautious by setting a stop-loss.
4. Sneaky Insights
As the name says, these insights are exactly a mainstream indicator that are widely announced. These insights primarily include the efficiency of the company, their P/L statements, news about the company’s board, and others of the similar kind. Gaining such insights will give you an upper hand when it comes to making investments as it can provide you a perspective that cannot be gained otherwise. For instance, if you closely follow the news about a certain company, you would most likely gain information about events like a new product launch, change in the company board, wtc. Such insights can help you make strategic moves when it comes to investing in that certain company.
5. Relative Strength Index (RSI)
The RSI is a measure of how much of a particular stock is oversold or overbought. Keeping an eye on this indicator can help you understand the momentum of the stock and invest accordingly. For instance, if the RSI indicates that a certain stock is oversold, it means that there is more likely going to be a rise in the next few days.
Understanding these uncommon investment strategies can be extremely helpful and can help you gain a different perspective when it comes to investments. Ensure that you choose good stocks in order to gain profits from your investments be it long-term or short-term.