Investments

UNDERSTANDING STRATEGIES AND STYLES OF INVESTING

Find out about the different approaches - or ‘investment strategies' - investment managers use to meet their portfolio objectives.

WHAT IS AN INVESTMENT STRATEGY?

Investment managers have different approaches — or ‘investment strategies' — to meet the objectives of their portfolios. They play a key role in determining the future risks and returns associated with the portfolio.

An investment manager may change their strategy according to market conditions, and may use a blend of styles and strategies.

TYPES OF INVESTMENT STRATEGY

At a high level, the most common strategies for investing are:

Growth investing

Growth investing focuses on selecting companies which are expected to grow at an above-average rate in the long term, even if the share price appears high. Types of growth investments can include smaller companies, emerging markets, recovery shares, internet and technology stock.

Value investing

This strategy relies on the market overreacting to good and bad news, resulting in extremes of stock price movements which don’t necessarily match a company's long-term outlook. Investors buy stock when the price is low and sell when it increases.

Quality investing

Quality investing focuses on companies with outstanding quality characteristics such as credibility of the management or stability of the balance sheet. A quality portfolio can contain both growth and value attributes.

Index investing

Index investing is also known as passive investing; focusing on creating a portfolio of assets designed to match the returns of a market index. The assets held by the portfolio will be entirely defined by the components of the selected index.

Buy and hold investing

Buy and hold investing focuses on purchasing securities and holding these for a long period of time (usually many years) to achieve returns.

INVESTMENT STYLES

You should have an understanding of the investment style of the manager before you invest. This will provide you with some insight into which risks and returns you’re likely to be exposed to, and what the drivers of those returns are likely to be.

There’s much debate about the relative merits of active and passive — two common investing styles — which are based on very different views of how capital markets operate.

You can find out more about active and passive investing in Beyond the benchmark: active or passive investment management?

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FIND AN INDEPENDENT FINANCIAL ADVISER

We can’t give advice, so we’d recommend that you find an independent financial adviser before investing.

More about investment advice for charities
CAF Financial Solutions Limited (CFSL) is authorised and regulated by the Financial Conduct Authority under registration number 189450. Registered office is 25 Kings Hill Avenue, Kings Hill, West Malling, Kent ME19 4TA. CFSL is a subsidiary of Charities Aid Foundation (registered charity number 268369).

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