Investment styles Flashcards
1
Q
Describe momentum investing
A
- Identify trend
- Trend accelerating
- Sell before trend ends
- Ignores fundamentals
- Generally short term
2
Q
Describe contrarian investing.
A
- Consensus usually wrong
- Returns from going against the herd
- Positive when outlook negative
- Price less than intrinsic value
- Generally long term
3
Q
Describe value investing.
A
- Indentifies undervalued stocks
- Compared to their fundamental value
- Market is inefficient
- Believes price will return to fair value
4
Q
Describe the four ways ETFs can replicate an index.
A
- Full replication - buys all stocks in index in correct weightings
- Stratified sampling - buys selection of stocks in index
- Optimisation - buys computerised model of index
- Synthetic - uses derivatives
