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Different Investment Styles
In the previous section, we discussed the various types of portfolio management. Apart from that, portfolio managers can adopt different styles or a combination of several of them to bring out the best results for a portfolio.
Let us now take a look at some of these styles:
Value or growth
A portfolio manager may decide to concentrate on the current value of a company (value-based investment) or its future growth potential (growth-based investment).
Size of the company- Small, Medium or Large-cap
A portfolio manager may concentrate on only large-cap stocks for a portfolio or may decide to diversify into the small and medium cap as well.
A portfolio manager may decide to follow market trends and make investments accordingly. This is known as a momentum style. On the other hand, he/she may also decide to go against the trend, and take decisions based on his/her experience. This style is known as a contrarian style.
In momentum investing, an investor buys securities that are showing an upward trend and sells them when they have peaked. The investor is always on the lookout for buying opportunities and makes use of short-term uptrends. Of course, this kind of investing style requires severe practice to spot purchasing opportunities and is quite risky.
Please note that there are many more investment styles. We have only explained a few of them above.