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Different investors will seek different kinds of strategies that will suit their preferences, goals, and risk tolerance. When it comes to mutual funds, there are various strategies LBLV Online Trading you can employ. Here are the top 3 investment strategies for mutual funds that you can use now.
Value Investing
Value investing is arguably the most established, widely used, and respected stock market investing strategy. It was first popularized by Benjamin Graham in the 1930s, buying stocks during the Great Depression focused on companies with real value and whose stock prices were undervalued and/or not overinflated, which means they were not vulnerable to drastic falls.
The most common value investing LBLV Live Trading Signals measure used by investors to spot undervalued stocks is the price-to-book (P/B) ratio. Value investors want to see P/B ratio of at least lower than 3, and ideally lower than 1.
On the other hand, since the average P/B ratio can differ largely among different sectors and industries, analysts usually evaluate the P/B value of a company relative to that of similar companies in the same business.
Although mutual funds do not technically have P/B ratios , the average weighted P/B ratio for the stocks that a mutual fund holds can be found at different mutual fund information sites. There is a massive number of mutual funds that tag themselves as value funds or that expressly state that they have value investing principles as guide to the fund manager’s stock selection.
Contrarian Investing
Obviously, contrarian investors try to go against the flow of the prevailing market sentiment or trend. One example of this is selling short, or even not buying when everyone else are buying and projecting above-average gains for companies operating in the specified industry.
In other words, contrarians usually buy what the majority of investors are selling and sell what the majority of investors are buying.
Since contrarian investing usually favor stocks that are perceived weak or whose prices have declined, some see contrarian investing as similar to value investing. On the other hand contrarian trading strategies are usually driven more by market sentiment. It also doesn’t focus too much of fundamental analysis metrics like price-to-book ratios.
There are a lot of mutual funds that can be considered as contrarian funds. Investors can search for contrarian style funds to invest in or they can employ a contrarian mutual funds strategy by investing in mutual funds while using contrarian investing style principles.
Momentum Investing
Momentum investing tries to gain some profits by following strong existing trends and it is closely related to a growth investing approach. Among the key measures considered in momentum investing is the weighted average price-to-earnings growth (PEG) ratio of the fund’s portfolio holdings or the percentage year-over-year increase in the fund’s net asset value (NAV).
Investors who want to use momentum investing can find appropriate mutual funds by the description where the fund manager clearly states that momentum is a primary factor in his selection of stocks for the fund’s portfolio.
Investors who want to follow market momentum through mutual fund investments can analyze the momentum performance of various funds and make fund selections accordingly.
Momentum investors may also try to search for specific sectors or industries that are demonstrating clear evidence of a strong momentum. After searching for the strongest industries, they can invest in funds that offer the most advantageous exposure to companies that are involved in those industries.
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