What is an 'Investment Philosophy'

An investment philosophy is a set of beliefs and principles that guide an investor's decision-making process. Some popular investment philosophies include:

  • Value investing which involves seeking stocks that an investor believes are currently underpriced by the market and whose prices the investor expects will eventually rise significantly.
  • Fundamentals investing which relies on identifying companies with strong earnings prospects.
  • Growth investing in which investors buy shares of companies whose products or services hold the potential to generate strong earnings growth and higher stock prices in the future.
  • Socially-responsible investing which focuses on investing in companies whose practices align with an investor's values as they pertain to the company's impact on society and the environment.
  • Technical investing which relies on the examination of past market data to uncover hallmark visual patterns in trading activity on which to base buy and sell decisions.

BREAKING DOWN 'Investment Philosophy'

Investment philosophies are one of the defining characteristics of people or firms that manage money. Most investors who achieve long-term success develop and refine their investment philosophies over time and do not frequently switch between philosophies as market conditions change.

Example of Investment Philosophy

For example, Warren Buffett has practiced a value investment philosophy since studying under legendary value investor Benjamin Graham at Columbia University in the early 1950s. Similarly, proponents of socially responsible investment are likely to remain steadfast in their avoidance of companies whose activities they disfavor — such as firearms production or gambling — even when fundamentals or technical factors are favoring those companies' stocks.

  1. Benjamin Graham

    Benjamin Graham was an influential investor who is regarded as ...
  2. Graham Number

    The Graham number is the upper bound of the price range that ...
  3. Active Investing

    Active investing refers to an investment strategy that involves ...
  4. Impact Investing

    Impacting investing is investing that aims to generate specific ...
  5. Large-Value Stock

    A large-value stock is the stock of a large company where the ...
  6. Value Fund

    A value fund is a fund that follows a value investing strategy ...
Related Articles
  1. Managing Wealth

    Invest Like A Pro

    By following the strategies of the pros, even a beginner can learn to invest like an expert.
  2. Investing

    Mutual Fund Due Diligence: 5 Things to Look Out for in Quarterly Reports

    Learn about five important items found in a mutual fund's annual and quarterly reports and why investors should pay attention to changes in these items.
  3. Investing

    Investing Lessons from Warren Buffett

    When Warren Buffett speaks, investors listen, with good reason.
  4. Investing

    Great Investors Not Named Buffett

    Warren Buffett deserves the praise he gets, but there are many other investors worthy of study.
  5. Financial Advisor

    Overview of American Funds Fundamental Investors Fund (ANCFX)

    Discover American Funds Fundamental Investors Fund, a large-cap stock fund with excellent long-term returns. Learn about what makes its parent, Capital Group, special.
  6. Managing Wealth

    Warren Buffett's Bear Market Maneuvers

    This esteemed investor rarely changes his long-term investing strategy, no matter what the market does.
  7. Investing

    The Top 5 Books Every Young Investor Must Read

    Reading these respected books by finance legends will provide indispensable business and investing insights for young investors.
  8. Investing

    A Guide to Value Investing Strategies

    Learn the value investing techniques that legendary investors like Warren Buffett and Peter Lynch have used to identify undervalued companies that pay off.
  1. How do business ethics differ among various countries?

    Find out why business ethics differ between countries, including laws relating to controversial topics that may differ from ... Read Answer >>
  2. How does Warren Buffett choose his stocks?

    Investors have long praised Warren Buffett’s ability to pick great companies to invest in. Here are the key considerations ... Read Answer >>
Hot Definitions
  1. Gross Profit

    Gross profit is the profit a company makes after deducting the costs of making and selling its products, or the costs of ...
  2. Diversification

    Diversification is the strategy of investing in a variety of securities in order to lower the risk involved with putting ...
  3. Intrinsic Value

    Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, and may differ ...
  4. Current Assets

    Current assets is a balance sheet item that represents the value of all assets that can reasonably expected to be converted ...
  5. Volatility

    Volatility measures how much the price of a security, derivative, or index fluctuates.
  6. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
Trading Center