There are a few different investing styles that investors can adopt, and each has its own advantages and disadvantages. However, the most important thing for us to do as an investor is to pick one that we feel most comfortable with. That’s how we can sleep soundly at night.
The few investing styles I am referring to are: income investing, growth investing, and value investing. I had discussed all three styles previously, and the articles can be found here, here and here. In this article, I will be sharing about the possibility of implementing a mix of these styles.
It’s not necessary to adopt just one investing style. In fact, most investors implement a mix of styles. Personally, I tend to adopt both a growth and income investing style. Let me explain to you why I do this and how I do it.
When I first started investing, I had little capital to invest. After a few months of investing, I realized this was an issue. To solve this problem, I decided that I should invest in income stocks. This serves two purposes. Firstly, the income stocks will provide me with income that I can redeploy into the market. Secondly, there was lower risk with the income stocks. Although the income investing strategy looked appealing at the start, I soon realized that while income stocks were good for generating new investment capital, their lower risk profile meant little capital appreciation.
Having time on my side, I then decided that I should tweak my portfolio slightly to include growth stocks. The reason for this was simple: I wanted to enjoy decent capital appreciation in my portfolio. For a younger investor, capital appreciation is important as it usually outpaces dividend growth. This allows an investor to achieve higher returns – but it does come with higher risks.
To manage my risk (at least mentally), I decided to use the income generated from my income stocks and invest it into growth stocks. This would mean that any dividend income that I received was reinvested into growth stocks. It has been five years since I have adopted this strategy and so far, it has worked for me.
What I’ve shared is just one example on how an investor’s investing style can change over time and become a mixture of styles. There is no right or wrong strategy to use when investing – what is important is that investors pick or mix strategies that suit their personality and character. This would then allow them to sleep well at night while their portfolio of stocks does the heavy lifting.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.