Want to invest in stocks? Try 'concept investing'

A steep fall in equity markets tends to attract bargain-hunting investors to pick up stocks. But how do you choose what stocks to pick?

Are you one of those old-school investors who buy stocks the traditional way on the basis of growth and dividends? Well, it may be time for you to change your habits.

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Many brokers are now luring investors with an investing technique called ‘concept investing’, which basically requires picking stocks on the basis of a study or a concept, says a “>report in Business Standard. Some of these concepts include ’ten-baggers’, ‘good’ and clean’ and ‘good governance’. For example, ’ten-baggers’ are stocks whose prices are expected to rise in the next 10 years, while ‘good’ companies refer to companies with good cash flows. ‘Clean’ companies refers to firms that have no political connection, while ‘good corporate governance’ is well, those that have strong corporate governance standards.

Of course, some of you might argue that such concepts are just an extension of traditional ideas of ‘value’ companies. Pankaj Pandey, head of research at ICICI Securities, says that investors should basically keep in mind their reasons for buying a stock and whether these suit their risk appetite and time horizon, Business Standard notes.

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It’s also important for investors to realise that ‘concept investing’ is not the same as ’theme investing’. In the latter, one goes for sectors like construction, etc, while concepts recommend a style of investing.