There are multiple approaches you can take to investing and it’s important to know what your strategy is, and what you are trying to achieve. I’m going to cover three of the most common types of investing strategies: dividends, growth, and value.
Dividend investors will want to look for stable stocks that have safe and growing payouts. This will ensure that you are maximizing your dividend income over the months and years to come. It’s a suitable approach for older investors trying to accumulate income for retirement or for anyone that wants some consistent cash flow.
If you want to focus on long-term growth then you’ll want to avoid dividend stocks since that means less cash is reinvested into a company, which will ultimately result in fewer growth opportunities. If you think of the most successful tech stocks, they don’t issue dividends and simply reinvest their profits to fund more growth. In today’s world, cannabis stocks might be your best bet for growth since they are in a new industry and there is a lot of potential there once marijuana is legalized. Growth stocks are more suitable for investors that are looking at the long term and are not risk averse.
Another investment strategy is value investing. Here you’d want to target stocks that are trading at low earnings multiples and that are not a lot higher than book value They’ll likely also have strong profit margins and offer good value to investors. These could include dividend stocks, but high-growth stocks will likely be too expensive for this approach.