What is ‘Analysis’
Analysis of style is the process of determining what type of investment behavior an investor or money Manager employs when making investment decisions. Virtually all investors subscribe to the investment philosophy and prudent analysis of the funds Manager’s style needs to be fulfilled before an investor can determine whether the Manager would be well suited for his or her personal investment goals and preferences.
Breaking Down The ‘Analysis’
There is an almost unlimited number of investment styles; however, some of the most common types of investment styles are categorized as investment, growth investing, large cap investment, small cap investing and active trading.
Some managers change their investment styles over time, preferring to go with the same approach, although it works well, then switch to another when the old approach seems to lose its luster.
Growth investing is a style and strategy aimed at capital growth. Economy investors usually invest in stocks, or companies whose revenues will grow above average compared to its industry or the overall market.
These types of stocks carry more risk because shareholders rely only on the success of the company to profit from their investment. If growth unexpectedly slow, shareholders may end up faced with falling stock prices.
Investment Style Value
Value investors often seek out stocks that tend to trade at lower price relative to their fundamentals and is undervalued as a result. The cost of stocks are often defined as having traits such as low price-to-yield or high dividend yield.
Value investors believe the market overreacts to news, be it good or bad, as a result of price fluctuations that do not coincide with long-term company fundamentals.
Active Trading Style
Active trading, also known as “day trading” or “swing trading” is a highly-speculative trading style. A day trader buys and sells securities to hold them for a short time, often no more than a day.
Active traders want to benefit from short-term price movements in highly liquid markets such as stocks, options and Forex. Most active traders use leverage (debt or borrowed capital) in an attempt to increase the potential return of the position. A margin account allows you to borrow money from a broker at a fixed interest rate for the purchase of securities in order to gain high level of profitability.