Investing Strategies and How to Use Them – Part 2

Continuing from the earlier chapter, let’s explore some additional investment strategies that can help you sharpen your financial planning and investing journey. 

Dividend Yield Investing 

Dividend yield investing focuses on earning a consistent income through dividends distributed by companies. Dividends are the share of profits that companies return to their shareholders. 

Formula: 
Dividend per Share ÷ Market Price of the Share 

Example: 
If a company distributes ₹40 as an annual dividend and its stock price is ₹100, the dividend yield is 40%. 

Companies offering high dividend yields may not experience rapid price growth, but they provide stable income streams, especially during volatile market phases. Such businesses are often highly profitable, mature, and less sensitive to market swings, making them excellent defensive holdings. 

Turnaround Investing 

Turnaround investing involves identifying struggling companies with the potential to recover and thrive. 

This strategy is not meant for casual investors. It demands thorough research, monitoring industry trends, and understanding the company’s strategic changes. A successful turnaround often depends on improved cash flows and management changes. 

Key aspects to focus on include: 

• Strategic revamps 

• New leadership teams 

• Strong generation of free cash flows 

If the company shows resilience and manages to turn around operations, early investors stand to gain significantly. 

Rupee Cost Averaging (Systematic Investing) 

Ideal for new investors or those who prefer a disciplined approach, Rupee Cost Averaging involves investing a fixed sum at regular intervals, regardless of market conditions. 

Example: 
Investing ₹2,000 every month in the same stock or mutual fund. 

How it works: 

• When prices fall, you buy more units. 

• When prices rise, you buy fewer units. 

• Over time, this helps lower your average cost per unit and reduces the risk of market timing. 

It’s a simple, effective strategy to stay consistent with your investments and reach your long-term financial goals. 

Core and Satellite Strategy 

As the name suggests, this approach involves creating a stable core portfolio supported by more dynamic satellite investments. 

• The core portfolio consists of reliable, fundamentally strong companies (such as blue chips), providing stability and steady returns. 

• The satellite portfolio includes higher-risk, higher-reward assets like emerging companies or sector-specific investments. 

This hybrid method blends the best of passive and active investing styles. The core ensures portfolio resilience, while the satellite adds a tactical edge to boost returns. 

ESG Investing (Environmental, Social, and Governance) 

A relatively modern strategy, ESG investing emphasizes putting your money into companies that prioritize environmental protection, social responsibility, and sound corporate governance. 

Companies are rated based on ESG criteria by independent agencies, making it easier to shortlist responsible investment options. 

While ESG investing might narrow your stock universe slightly, it allows you to align your portfolio with personal values and support businesses that are making a positive impact on society and the environment. 

Points to Remember 

• Choose an investment strategy that aligns with your financial goals, time horizon, and risk tolerance. 

• Sometimes blending two strategies — such as growth investing with momentum investing — can offer better results. 

• Certain strategies, like dividend investing, not only build wealth but also generate regular income. 

• The more knowledge and time you invest in understanding different strategies, the better your investment outcomes will be.