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Types of Portfolio Strategies

A key lesson that investors should learn from financial markets is that there are no guarantees where the markets are concerned. Additionally, if one has to view markets realistically, investors must get used to change. Over time, investors are required to invent new theories to predict precise movements of the market, and even then, there’s no surety of the markets. It is important to understand that a hundred percent accuracy is not possible with regard to markets because they are driven by sentiment or emotions. Consequently, there are no measurable quantifiers in number. Having some reliable strategies in markets that are volatile, ensures that your portfolio can ride through unstable periods. Hence, when you open a trading account from the point of view of investments, portfolio tactics and strategies are a must.

What a Portfolio Is

A portfolio, in its truest sense, is an amalgamation of financial assets/ instruments. These could include shares, bonds, mutual funds, stocks, commodities, ETFS/exchange-traded funds, and also cash. Besides conventional instruments, assets like art, real estate, and private investments can be portions of an individual’s portfolio too. In the most traditional sense, a portfolio in India is synonymous with equity investing. You may open a trading account with a Demat account as a first step towards focusing on your portfolio, but after that, you have to consider a strategy that meets your specific financial requirements.

The Relevance of Strategies

Simple Demat account opening online puts you on the right track towards achieving your portfolio goals, but you have to start strategizing too. A strategy is a plan that forms a roadmap for investors, so that assets can be used in such a way as to achieve financial objectives. Financial markets are, to say the least, unpredictable. This is because the drivers of these markets are human feelings and emotions. Furthermore, any adverse circumstances can result in markets to move with volatility. Movements become drastic. To avoid getting swayed by sudden ups and downs, investors must have strategies that maintain clarity of thought. An investor’s main goal should be the preservation of capital. Profit can come later on. Therefore, appropriate strategies act as a hedge against risks.

Portfolio Strategies - Types

Some of the frequently-used tactics and strategies by investors who invest in the stock market in India and globally, are mentioned below:

Active Portfolio Strategies - If you are an investor with a view to beating any benchmarks of returns, you will think of an active strategy. A range of assumptions and forecasts are used to find out what securities are reliable purchases. Thus, investors are active, making frequent trades moving wealth consistently for long- term gains. If you don’t mind risks, this is a good strategy.
Passive Strategies - Contrasting with active strategies, passive strategies monitor weighted indexes in the market. Believing in the way the market flows, investors believe that markets are efficient.
Aggressive Strategies - As you may be able to tell by the name, these strategies are used by extreme risk-takers. The aim of this strategy is to maximise profits by taking a lot of risks.
Defensive Strategies - Conservative in their approach to investment, these strategies are employed by investors who are very careful when they invest in the stock market. They study trends in the market and do a strong technical analysis before formalising a portfolio. Such investors are averse to risk, but don’t mind a fairly good rerun on investment.

Have a Strong Portfolio

Your portfolio says a lot about you as an investor, and whether you wish to take risks or not, you should always consider taking the advice of a good broker. You can easily open a Demat account with an experienced one like Motilal Oswal and take advantage of the portfolio management services offered.