Aggressive Equity investors
Aggressive equity investors play their equity game both actively and vigorously. They spend most of their time and effort in managing their portfolio better than their conservative counterparts. The aggressive equity investors are inclined towards taking greater risks, although in a calculated manner, in order for them to earn superior rates of return. They seem to enjoy the pleasure and adventure of playing the equity game (Chandra, 2008). The following guidelines are relevant to for aggressive equity investors for investment decisions.
If equity investors wish to manage their investment well they should know that they should have knowledge of the company they are investing in more than the market knows the company. They, therefore, should decide on where their focus will fall. This decision is very key the success of the investment and as such investors should not handle it casually. Equity investors should have to decide on whether to concentrate on growth, value, public sector companies, small companies or multinational companies, high grade bonds or low grade bonds or anything else. In their strategy, these investors should be tough-minded, thorough, and flexible and know a great deal of any company they are buying into. To get an inherently sound value approach, equity investors need to be of reasonable and good intelligence and have sound principles of operation.
Know their investment sweet spot
For an investor to succeed, he/she must know themselves first. Their emotional and intellectual capabilities will largely determine their investment success. The intellectual capabilities of investors include the ability to analyze financial statements, the capacity to master and manage knowledge, the memory and recall power, and the flair for developing insights and understanding from unstructured data and information. The emotional capabilities include the ability to maintain composure in a challenging environment and the capacity of the said aggressive investor to deal rationally with volatility and disruptions that the investor may face on the daily basis. Every investor has within has a zone of competence that defines the kind of investment in which he or she is skillful and a comfort zone that represents the area of investment in which the investor is comfortable and calm. The sweet sport of the investor is represented by the overlap that exists between the area of competence and the comfort zone.
The other guidelines include; monitor the environment with keenness, beware of the games operators play, anticipate earnings a head of the market, scout for special solutions in the secondary market, leverage their portfolio when they are bullish and take swift action. Aggressive equity investors should also pay head to growth shares.
Guidelines for conservative equity investors
Conservative equity investors seek to minimize the risks involved in investments as well as the time and effort devoted to portfolio management. What conservative investors need is their peace of mind, and not the advantage that come with aggressive investment. They do not deliberately strive for spectacular gains when satisfied with a reasonable return. The following guidelines should be born in mind by conservative investors:
Avoid certain kinds of shares
The shares that have been found to be unsuitable for conservative investors include shares of unlisted companies. The shares of unlisted companies do not have an organized market for them, and it is difficult to access their market price. To determine whether shares are listed, they should be included in the quotation list of the stock exchange in which they are listed. If they are unlisted, then they are not included in the quotation list.
The next unsuitable shares are manipulated shares. Some business groups resort to manipulate shares of their companies, in the form of market support to boost the share prices, particularly before rights issue or a public issue. As a general guideline, conservative investors should avoid such manipulated shares (Sudhindra, 2009). Conservative investors should also avoid cornered shares that arise as a result of cornering operations from time to time.
Apply stiff screening
The conservative investor should consider the shares in the secondary market that satisfy stiff requirements. The stiff screening criteria recommended include:
- Size: in this category, the turnover of the company should be able to tell that it is not very small.
- Competitive position: the company’s competitive position should be reasonably strong. It should enjoy a respectable market share, or the market should be growing.
- Industry prospects: the company must belong to prospects that are above average. The industry should not be stagnating or declining.
- Reputation of management: the management of the company must have a reputation of being competent, dynamic, committed, and integrity. It should be remembered that the management factor plays a role that is critical and decisive in the success or failure of a company.
Look for relatively safe opportunities in the primary market
A conservative investor may be hesitant to buy share in the secondary market. The reason for this measure is partially because volatility bothers the investor and partially because an investor feels that locating good bargains may be very time consuming. As such, the investor may turn the attention to the primary market where companies issue new securities.
Chandra (2008). Investment analysis 3/E. Tata McGraw-Hill Education.
Kiplinger’s (1995). Kiplinger’s personal finance. Kiplinger Washington editors.
Sudhindra, B. (2009). Security analysis & portfolio management. Excel Books, India