There is no royal road to becoming rich. Just as you can go to Seoul if you go to Moro, the type of investment itself is not important. But on the other hand, not everyone can go all the way. A person who runs quickly on flat ground. A person who is good at mountaineering. People who go slowly and steadily without resting, etc. There are ways that work for you and ways that don't.
What is clear is that there is no way to succeed without a clear investment philosophy. Therefore, for novice investors, knowing their investment tendencies and Learning in the right direction is It is much more important than studying stocks through broadcasts or YouTube or analyzing market conditions.
Value Investment
It is the most widely known investment method among individual investors in Korea. Representative investors include Warren Buffett and Benjamin Graham, but there are many differing opinions. Calculate the company's intrinsic value or future value through indicators or financial statements, and purchase when the price is below that price. Since it is a so-called buying cheap and selling expensive method, it is in line with human nature and causes little resistance.
However, if you make a misjudgment, your funds may be tied up for a long period of time or you may incur increased losses due to running out of money. Many people focus on price rather than value. Although it is the most widely known method, it is also quite poorly known.
Investing in growth stocks
It is an investment method that primarily focuses on growth in sales or profits. When it comes to masters who invest in growth stocks, Philip Fisher and Peter Lynch are representative examples.
Nasdaq-leading stocks such as Tesla and Nvidia are often thought of as representative growth stocks. Considering the investment methods of the two masters, this may only be half true. It is true that both emphasized the increase in long-term profits, but consideration of value was also important.
Because ‘growth stocks’ are perhaps more controversial than ‘value stocks’, I will cover this in more detail as I write about the investment styles of great leaders.
Asset Allocation
It is a method of investing by mixing various assets such as stocks, bonds, raw materials, real estate, and cash. By analyzing different correlations of assets, asset classes and proportions are determined, Depending on the investment method, issues, timing, and various indicators may be considered. Buffett's 90% S&P 500, 10% short-term bond portfolio, or the traditional 6:4 (stock:bond) portfolio, Ray Dalio's All Weather portfolio is a representative example.
In terms of true diversification, it is more stable than stocks, Expected profits are low (generally within 10%).
Of course, there is also a loss section. In particular, if an exceptional situation occurs in the previously analyzed correlation, It may remain in the loss zone for several months or even years. It is also a method included in quantization in that it is based on past changes.
Quant
It is a methodology that creates a strategy based on past performance and invests as is. Because it is based on all the data that allows you to set rules for entry, profit and stop loss points, Depending on the methodology, charts, values, asset allocation quants, etc., similar strategies to other investment types may be adopted. What is different from other investment methods is that they assume that past patterns will be maintained in the future. Establishing a strategy based on backtesting, a method of applying current rules to the past, And it is different in that it excludes ‘all’ variables other than the already established strategy.
Even beginners just need to follow the strategy, and the expected results of ‘backtesting’ are clear. It has the advantage of having a low entry threshold, but without understanding quant, people only believe in over-optimized results such as ‘annual average of 50% and maximum loss of less than 10%’. This is a method that can lead to great hardship if you try it.
Chart Investment
Invest mainly based on charts and materials, such as scalping, single hitting, and swing. Because we check and trade relatively frequently, it is easy to be swayed by emotions. Also, if the methodology is not firm, it is easy to fall into blind trading because the chart is really just how you see it.
Concluding
In this article, we looked at the representative investment types in the market. However, this is only a general classification based on the author's subjective opinion. Not only are countless subdivisions possible, but there are also various investment methods that do not fall under the above. Roughly speaking, by combining the investment methods for each investment method, I hope this will be of some help in objectifying yourself and establishing your own investment philosophy.