INVESTMENT STRATEGIES :
Bottom up Investing: This is an investment strategy which considers the fundamental factors driving individual stock performance before considering the economic prospectus which affect the industry and within which the company operates.
Top down Investing: This is an investment strategy which first takes a view on the economy and then looks at the industry scenario to assess the potential performance of a company. This is opposite to Bottom up Technique.
Equity funds are considered aggressive in so far as higher capitalisation is sought. Investors should have a long term orientation, since companies shares give fluctuating dividends and offer benefits only in the long run through rights issue, bonus issue etc.
Balanced funds are considered moderate since investors seek growth and stability but with moderate risk. Such funds invest both in bonds and blue chip shares. While bonds give stable interest income, the share dividends will be fluctuated though in the long run, they may give larger benefits. The exact balance between the two asset classes namely – shares and bonds depends on the fund managers ability to take risk and his priority for return. The normal ratio between stocks and bonds is 55:45 but if the fund manager is aggressive he could choose a larger equity component.
Income funds are regarded as conservative since investors want regular income and can not wait for more than short to medium term.
Money market funds are regarded as high liquidity oriented as investors attach more value for safety and liquidity.
Sector funds invest only in shares of companies belonging to a specific industry. These funds perform well so long as the industry or the sector is in the upswing, but the risk could be high, if the industry or the sector goes down.