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  • Writer's pictureJashandeep Bansal

Early Investment Strategies and Term Sheet Analysis

The era in which we are residing is essentially one of the most advanced phases humankind has ever seen. There has been a significant shift in the lifestyle, tastes, preferences, and occupations that people tend to pursue with an inclination in the trend of investments not only in the domain of real estate but also in the zone of stock markets, digital currencies, and cryptocurrencies especially. Indeed, the advent of these digital tools has made things very convenient. This article will highlight the strategies required in the initial phases of making an investment expenditure and will also briefly about the term sheet analysis.

A healthy investment is a direct consequence of healthy and ethical protocols followed by the investor. These protocols are extremely essential for any investor to succeed in this uncertain world of funding and expenditure. One noteworthy feature of these strategies is that they can be customized according to the risk or tolerance that an investor is willing to bear. But, again this requires a deeper understanding of investing concepts as this can prove to be expensive. Hence, the following are some of the basic strategies that an investor must know and master:

  • Value Investing:

Value Investing is one of the most predominant strategies which basically involves picking up stocks that appear to be less than their book value and making money out of it. It is usually argued by value investors that the market functions quite irrationally or they tend to assume that the inventory marketplace is underestimating which actually motivates or provokes the people or investors in this field. This overreaction gives a possibility to earn income through shopping for shares at discounted prices. Overall, it is a funding method that includes choosing shares that look viable of being bought or sold for much less than their intrinsic or intrinsic value. Although, this exercise may turn out to be quite daunting. According to yet another website, in 2014, Wall Street Journal reporter Jason Zweig explained, “Over the decade ended December 31, value funds specializing in large stocks returned an average of 6.7% annually. But the typical investor earned a meager of 5.5% annually.” The explanation was quite clear. It was a consequence of too many investors deciding to pull their money out and run.

  • Growth Investing:

Growth investing is another promising field of investment policy. The investors seek promising and lucrative deals which may offer them a strong potential by increasing funds in the future. They evaluate the past, current, and expected health of the stocks before making a move. He considers the prospects of the industry in which the stock thrives.

  • Momentum Investing:

Momentum Investors rather have a very unique perspective towards investing. They argue that it is a game for the winners to win and losers to lose. They look to buy stocks that are trending up as they believe the losers continue to fall. But short selling is an extremely risky practice. These investors use a strictly data-driven approach to trade and look for trends in stock prices to guide their buying decisions. Essentially, aggressive investors act by challenging the Efficient Market Hypothesis (EMH).

  • Dollar-cost averaging:

Dollar-cost averaging is basically the practice of making frequent investments in the market over time. With DCA, you may choose to put a consistent amount in an investment account every month. The usage of automated features for investing makes it even more feasible to understand and execute. It assists in avoiding hindrances or obstacles due to market timing. When investment is done regularly, the investor is able to record both the low and high prices for the stocks which helps them in approaching the process more efficiently.

The next aspect that this piece of information highlights is the term sheet analysis. A term sheet is a very detailed and legally binding document that contains all the particulars of an investment agreement. Once the parties involved have reached an agreement on the details set out in the term sheet, a contract is drafted in accordance with the details of the term sheet. This not only serves as a record but also helps in ensuring the duties or the rights entailed within the agreement. Therefore, a Term Sheet is a significant and the most primary tool in the investing domain.

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