3 Type of Stocks you must have in your Investment Portfolio

 

Meeting your financial goals should be your first objective when you turn towards stock markets. You should have a clear idea about the kind of returns you need to achieve your goals, and more importantly the amount of risk you can afford to take. Then begins your quest of finding suitable stocks that you can buy and hold in your portfolio, no matter how the market is trending. In this post I will briefly explain different type of stocks, some you may have heard of before.

 

Blue Chip Stocks: Most Reliable Stock Market Investment

These are stocks of some of the most trusted and well-established businesses. Sound companies with exceptionally good financial health and a consistent track record of delivering better than expectations fall into this category of stocks. If you fear stock market investments, but still want to take certain amount of exposure to improve to improve your overall return then investing in Blue Chip Stocks is the best option. The key advantage of investing in blue chip stocks is that they are the pioneers in their specific industries and such stocks are less volatile when compared to smaller players in the industry. Another good reason to stay invested in such companies for long is the consistent dividend payouts. You can rely on them even in tough times, as they always steer ahead no matter how difficult the economic phase gets.

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Growth Stocks: Chasing Multi-Bagger Stocks to Improve Portfolio Performance

Growth stocks usually don’t pay any dividend to investors. These are stocks of very high growth companies, which tend to multiply in size very fast. So, they have an ever-growing need for liquidity to expand. As these companies expand the stock prices skyrocket, and investors chase them for quick profits despite the presence of high risks. However, you should be highly vigilant while investing in such stocks as they stand tall on the back of high expectations and even a small bit of negative news flow can break their back. While investing in growth stocks you should know the industry well enough to understand a particular company and its functioning, or rely on a good financial advisor who can manage your stock portfolio.

Value Stocks: Being a Bargain Hunter is a Tried & Tested Investing Strategy

At times stocks of good companies trade cheap due to some reasons that concern investors about their future potential. Usually, such stocks are good investment picks to be held on for long term. You can easily make out if the stock is trading cheap by looking at its P/E multiple. It’s not easy to pick value stocks as some of these are cold bets or beaten down businesses. You need to do ample research and take good financial advice before finalizing the stock you wish to buy and hold in your portfolio. Another important factor that you should know about before investing in value stocks is that these might not generate any return for long period of time, as these are out of flavor for investors and traders and off their radar.

Conclusion

There are many more types of stocks that you can choose from depending upon your investment style and risk profile. I will discuss few interesting ones in my next post. The types discussed above are most common and any average investor can constitute his portfolio among them. They key advantage of balancing your stock portfolio with these three types is that you get ample diversification, stability, and high earning potential. While blue chip stocks provide strength to your portfolio and pay high dividends, value stocks surprise with major turnarounds and growth stocks give a booster to your returns with fast price appreciation. In all, it’s a good way to constitute a stock portfolio in any kind of market, keeping the risk a little less than medium.

 

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