New Pension System

Investment Strategies

There are 2 types of Investment Strategies:

1. Active Strategy.

2. Passive Strategy.

Active Strategy:

* The main aim of this active investment strategy is: ''To give higher returns than Bench Mark ".

It means,'' The strategy is responsible to the changing expectations of the Fund Manager''.

His Prediction is based on Fundamentals and Technical Analysis.

Active Investment Strategies are:

1. Market Timing

2. Sector Rotation

3. Security Selection and

4. Investment Style.

* Active Investment Strategy will try to maximize the returns.

* It involves “Buying the stocks when market is down and Selling when the market is overvalued''.

* This strategy needs a lot of time, effort and risk to beat the Bench mark return.

MARKET TIMING:

* It is a plain forecast of the aggregate market and not for the Individual Asset.

* The Fund Manager will predict the market based on Fundamentals, Technical Analysis, Moving Day Average analysis and etc;

SECURITY SELECTION:

* Analyzing and Selecting the Securities.

* To Indentify the under value and better stocks to give better return than bench mark return.

INVESTMENT STYLE:

* It means,'' The fund manager will focus only on certain type of stocks''.

They are:

Growth Style.

Value Style.

Growth Style:

* These stocks are very popular in the market.

* Investing in companies which are growing rapidly.

* Stocks at Higher Earnings Growth, Higher P/E ratio & P/B ratio.

Value Style:

* Investing on Companies which are ignored or over looked.

* Stocks at Low P/E ratio & P/ B ratio.

* Stocks are out of flavor in the market at a given point of time.

* These Stocks will provide value over long term on a risk adjusted basis.

PASSIVE INVESTMENT STRATEGY:

* '' Index and Buy & Hold '' are examples of this strategy.

* These strategy is not responsible to the Fund Manager’s expectations.

*It involves 2 steps :

1. To create a well diversified portfolio.

2. Hold it over a period till it does not match the risk -return profile of the investor.

* This strategy is suitable to the Investors who are not interested to take higher risk.

* It reduces the Transaction Costs, Capital Gain Tax & etc;

INDEXING:

* To match the Investment returns with Index.

* It is just replicating the Index.

*It is a ''Passive Investment'' approach.

Broad Diversification, Low Trading, No mis pricing.

BUY AND HOLD:

*Warren Buffet uses this strategy.

* It is to buy a certain asset class or mix of asset classes and Hold on the Investments.

* No churning of the Portfolio.

* Aim is to maximize the returns or minimize the risk.

* More time and energy is required to select the security/ asset class.

* The main Principle is:'' returns over long period''.

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