Lawrence A Cunningham explains in his book, What is Value Investing?, there are 5 styles of investing dominates the investment world today. These styles known as:
1. Value Investing
2. Growth Investing
3. Index Investing
4. Technical Investing
5. Portfolio Investing
All these investment philosophy centered on the relationship between price and value of the particular stocks or securities. Let us look much more detail what are those styles all about.
Value Investing
Value investors seek stocks of companies priced below it’s value. This strategy introduced by Benjamin Graham and David L. Dodd of Columbia University and improved by their students Warren Buffet, Berkshire & Hathaway Chairman, who makes billions of dollar from this strategy. The value investors will focus on value and seek current value greater than current price.
Growth Investing
Growth investor seeks companies whose earnings gains promise to boost intrinsic value rapidly. Philip A Fisher pioneered this strategy and Magellan fund manager, Peter Lynch extended it further. They will focus on growth and seek the value rising faster than the price.
Index Investing
Index investor will buy shares that represent that replicate a large market components such as Standard & Poor 500. Ben Graham endorsed this idea suits for defensive investor. Follow the averages as stated more by Buffet. Buy the whole market rather than picking a particular stocks. John C Bogle popularized this method by ignoring price-value relationship and buy the market.
Technical Investing
Technical investors use charts to analyze the price of any particular stocks. Dow theory suggested that market discounts everything and the market will always rise and fall. Technical investors study market behavior which come from human greediness and fearful. They not really care about the value but they would like to see any stocks that can be sold quickly at higher price.
Portfolio Investing
Portfolio investors determine their risk appetite and buy a collections of stocks and securities that can match the risk level. They believe that price and value are identical and investor should pick a mix of securities that can bear the risk level.
Which one is yours?
Happy investing.