by Nipapun Poonsateansup, CFP® Dependent Financial Planner
At present, there are more than 500 companies listed on the Stock Exchange of Thailand, which can divide the shares into groups. Each group of shares will have different price movements and investment strategies. If investors have studied and understood the various stocks, will allow investors to define appropriate investment strategies. We can divide the shares into 5 groups as follows.
1. Blue-chip Stock is stocks of large companies with stable operating results. Is known for the whole country (There are products or services that are widely known), has a market capitalization value, stable financial status and can make a profit in a sluggish economy with a non-volatile yield. In most cases, the return rate will be close to the return of the stock price index and can maintain the level of dividend payment regularly. Although the shares in this group may not have a surprising growth new investors need to have some blue chips in the port. Because when the market fell the price of this group of shares is usually not much down. The investment in this group of shares, therefore, has a relatively low risk.
2. Growth Stock is shares of companies with high profitability with clear growth in sales and profits and expected to be able to maintain high profitability in the future. Which is often a small company that is growing. The shares in this group tend to pay dividends at a relatively low rate. Because having to bring profits back to invest in the business or in new investment projects to create growth for the company. Causing the price of this group to tend to rise steadily and more often than other stocks, therefore is a stock that is very popular for trading. Investing in this group of stocks is, therefore, a precaution expelling the price because when there is a lot of demand, the price will go up and causing investors to buy shares at a price that is higher than the fundamentals. In addition, investors prefer to invest in growth stocks due to the expectation that future earnings will have a very high growth rate. However, if the company is unable to make a profit at a high rate as expected by the market, the price of this group of shares may be more severe than other stocks in the group.
3. Cyclical Stock is a stock that the trading price has fluctuated according to the economic cycle. when the economy is good, the company's performance will be good as well. But if the economy is sluggish, the operating results of the company will be sluggish as well as the economy as well. Therefore, the investment in this group of share has a relatively high risk. The important thing that investors need to pay attention to is the timing of entry and exit. The investor must closely monitor the movement of the economy. If at any time seeing that the economy tends to slow down, must hurry to sell the stock. On the other hand, If the economy is going to raise the price of this stock will begin to increase. Which we may call Turnaround or Turnaround Stock. Is the stock of a company that is in recovery from the downturn. In addition, cyclical stocks are often stocks that are based on commodities, which prices vary according to the global market mechanism. The company has almost no ability to control prices, such as world oil prices and oil drilling stocks, petrochemical stocks, refinery stocks, asphalt stocks, airline stocks, transport stocks, coal prices and coal stocks, freight Index with shipping stocks, etc. The appropriate strategy model is speculation by forecasting from the commodity price. Investors need to closely monitor the situation of that industry. Including understanding the mechanics of the industry well to find the relationship between the commodity price and the company's performance.
4. Defensive Stock is stocks that do not fluctuate according to economic conditions with a consistent rate of return, stable, not varying according to market conditions. Defensive stocks tend to outperform the market during periods of a sluggish economy. However, during the economic expansion, stocks are usually not as good as the market. That is, the return of the stock is increased or decreased less than the return of the stock price index. Examples of defensive stocks such as utilities because no matter which period of the economic cycle, we all still need electricity and tap water. Or shares in the hospital group where birth to hurt death is a common matter of life that must occur regardless of any economic cycle. These industries do not vary according to economic conditions, whether they are in a recession or prosperous period demand will increase or decrease much from the original. With the low volatility of this group of stocks causing investment in this group to have a relatively low risk when compared to stocks in other groups. However, the opportunity to make a profit in this group is low as well. The investment in this group of shares is suitable for investors who cannot accept high risk. And should invest in the period when the market is likely to fall because the price of this group of shares is not much lower compared to the market.
5. Speculative Stock is shares of businesses that do not have a good operating history or have proof of future profitability and high risk. The profit of this type of stock is highly uncertain, unstable, the running of the price is very volatile. In most cases, people who buy speculative shares will be able to take a lot of risks and there may be assumptions that are based on beliefs or expectations that the stock price will rise with no analysis. This type of stock trading is, therefore, short-term speculation. If investors are interested in buying speculative shares, must first evaluate yourself that is there a time to follow news and stock prices closely? And must have a lot of knowledge and understanding in using technical factors to analyze the trading timing. If you cannot do that, you may lose.
In summary, although the investment is risky, we can overcome that risk by studying Looking for knowledge and thorough information for decision making that what investment type is the most suitable for our investment goals. And after we have invested, another thing that is equally important is the evaluation of investments. By finding techniques from what we accomplished and learn from mistakes, to improve our investment in the further. If we can do all these, success is not far beyond reach. Wish you all good luck in investing