As you read different newsletters and reports about investing, you’ll find they may feature a certain approach to investing. For example, renowned investor Warren Buffet invests in solid businesses at bargain prices. This is just one of a number of popular investment strategies you may want to learn more about as you develop your own investing style.

What is value investing?

This approach involves picking good companies that seem to be undervalued because they cost less than similar companies in the same industry. It doesn’t mean buying any stock that drops in price and therefore seems cheap.

Watch this video of George Athanassakos, finance professor who holds the Ben Graham Chair in Value Investing at the Richard Ivey School of Business, University of Western Ontario, with Rob Carrick from the Globe and Mail discussing seeking undervalued stocks with the potential to rise. George also defines value investing in this video and talks about value investing as an investment strategy in this video.

Tip: A lower stock price can mean the company is in trouble right now, but the investor believes that it will do better in the future. Value investors have to do their homework.

What is growth investing?

This approach involves picking companies that keep all their earnings to invest in growing their business. The stock may be expensive today, but growth investors believe that the company’s future growth will help the stock continue to go up in price.

What is index investing?

This approach iinvolves investing in a group of stocks that behave like a particular market index. You can make your own picks, or simply buy units of an Exchange Traded Fund (ETF). An ETF lets you invest in a group of stocks that behave like a particular market index.

What is top-down investing?

With this approach, you start looking at the overall economy first, to find out where there are strengths and opportunities. Then you pick the industries or sectors that will most likely perform well, choosing stocks with the greatest growth potential within that industry.

What is bottom-up investing?

This approach is the opposite of top-down investing, because it doesn’t focus on economic trends. It involves using assorted financial ratios and other indicators to pick stocks based on a company’s basic strengths, including its management team. Bottom-up investors believe a stock can perform well even in an industry that is not doing well.

What is socially responsible investing (SRI)?

This approach involves choosing companies that show a high level of care for the environment and social well-being. Some indexes are now available for these companies, such as the Dow Jones Sustainability Indexes, and the FTSE4Good Index.

Remember: There’s lots of free advice about investing out there.

Of course, as some people say, advice is often worth what you pay for it. If you’re not sure what approach would best fit your situation and your goals, get professional advice.

Learn more

SRI is a rapidly growing trend both here in Canada and in the US. To learn more, visit Canada’s Social Investment Organization.