Investment Strategies

 
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Investment Strategies

Investment Strategies are the tools used by an investor to realize a gain[1]. Various rules, procedures, behaviors, methods and algorithms can be applied in different markets and different types of investments. All strategies attempt to involve an analysis of the risk-return on an investment. Simple strategies can either take advantage of a market condition or event to maximize return or avoid a threat that increases risk. Advanced strategies can attempt to control risk in greater detail, in more circumstances or maximize return by planning for success. Strategies are sometimes further evaluated by the action required on the part of the investor, passive strategies requiring little or no action after the initial investment is made, and active strategies requiring more frequent or constant adjustments.--PGSanalyst 21:35, January 28, 2009 (PST)

Buy and Hold Strategy

Indexing

Market Timing

Stock Picking

Stock Picking is an Investment Strategy that utilizes a systematic procedure for evaluating stocks to add or subtract from an investment portfolio based upon various stock selection criteria[2].

Hot Tips

A Hot Tip is an Investment Strategy whereby the investor attempts to rely upon the advice of an apparently reputable and legitimate source presenting information that is claimed to be "secret" or "private" or otherwise not know to the general public and the marketplace. However, hot tips can range from dependable to foolishly ridiculous and perhaps even constitute illegal insider trading. This is really a strategy that is not a strategy simply because the frequency and dependability of stock tips is so variable and unreliable that an investor could not realistically expect to consistently employ stock tips alone to build a portfolio and realize meaningful gains.--PGSanalyst 22:25, January 28, 2009 (PST)

Leverage

Leverage means doing more with less. Investment Strategies often utilize the concept of leverage to attempt to maximize gains. Leverage offers the investor a potentially wonderful tool to "get ahead" and realize inordinate gains when compared to strategies without leverage employed. Unfortunately, leverage can also accelerate losses unless a strategy is utilized to control the negative vector.--PGSanalyst 22:25, January 28, 2009 (PST)

Margin

Computerized Algorithmic Strategies

Computerized Algorithmic Strategies are usually referred to as Algorithmic Trading[3] or Automated Trading. But even though the word "trading" is used in the description, sophisticated investors should understand that this type of investing is based on a type of carefully designed, detailed, strategy. Computerized Algorithmic Strategies are some of the most advanced and complicated Investment Strategies. By using the leverage available from the speed of computation of modern computer systems running mathematically advanced Algorithms, investors can attempt to gain a temporary advantage over others in the marketplace who lack such tools. Unfortunately, all Algorithmic Trading strategies depend entirely on "modeling" the investment space and building an algorithm to attempt to produce a controlled result. Modeling complicated natural linear-dynamic systems like stock markets is incredibly complicated and can sometimes fail completely, such as in the famous example of Long Term Capital Management[4].--PGSanalyst 21:35, January 28, 2009 (PST)

Fixed Income Arbitrage Strategies

Fixed Income Arbitrage Strategies[5] are designed to take advantage of the inefficiencies in the market structure in the pricing of bonds issued from financial instruments with a stream of fixed income. This type of strategy is generally regarded to be one for the "big boys" in the nature of hedge funds and professional arbitrageurs and as such is considered highly risky.--PGSanalyst 23:53, January 28, 2009 (PST)

Passive Strategies

Passive Management[6] is an Investment Strategy that attempts to utilize the least amount of transactions by a fund manager in order to minimize transaction costs.

Tax Strategies

Investment Strategies are all designed first for tax law compliance and second for tax law opportunity. The gains or losses from securities transactions are strategized based upon the overarching schema of the "Capital Gains Tax Laws" in the US. In general, the capital gains laws[7] are designed to promote investment by offering an investor a lower taxation treatment on investment income as compared to ordinary income. This is a "public policy" decision made by the government to promote the general welfare of the economy by encouraging investment (risk taking) in private companies and public entities. It is critical for an investor's success that they have at least a general understanding of the overall strategy when purchasing a security and the potential impact of both the Short Term and Long Term Capital Gains rules under the US Internal Revenue Code.--PGSanalyst 21:35, January 28, 2009 (PST)

Professional Fiduciary Strategies

Professional Fiduciaries managing funds on the behalf of others must carefully analyze the risks of strategies to avoid potential liability for Breach of Fiduciary Duty. The due diligence process and analysis involved can be extremely difficult and time consuming due to the vague body of law associated with many fiduciary duties.--PGSanalyst 21:35, January 28, 2009 (PST)

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