Best Investment Strategies
Know how to play the stockmarket!

It is important as a stock market participant that you focus on the best investment strategies in order know how to play the stockmarket and to make the best stock investments. Investing for value is the approach I adopt.

However, there are a number of strategies being employed to buy and sell shares ... and you have probably come across some of them already. They can be roughly divided into speculative strategies and investing strategies.

I will discuss both here as you need to be aware of the difference between the two approaches. The top speculative strategies are mentioned so that I can tell you why I avoid them.

How do they differ? There are a few characteristics that can immediately distinguish one from the other. I list them below ...

• Speculative strategies usually have a short time frame like stock market timing strategies. This can be as short as minutes through to days. The best investment strategies normally operate over a much longer time frame - usually more than five years;



• Speculative strategies normally focus on the share price. The best investment strategies are more focussed (or exclusively focussed) on the company's characteristics, rather than its current price;



• Speculative strategies tend to be more aligned to the sentiment in the market. Investment strategies tend to pay much less attention to the market and focus on the company itself;



• Speculative strategies tend to rely on short-term capital gain and hence are often used to provide an alternative to other employment. The best investment strategies rely more on dividends as well as longer-term capital gain and are more often used to provide a supplement other income.

As you make investment decisions, consider the differences listed above and think about whether you are speculating or investing.

Sometimes people think they are investing, whereas in reality they are speculating, because they cannot always clearly distinguish between the two. This commonly occurs when there is a lot of exuberance in the stock market.

Probably the easiest way I keep myself on the investing straight and narrow is to ask myself, when I am about to make a buying decision, "Is it very likely that I will still want to own this stock in five years time?". If the answer is no, then I think twice about the next move.

I review a range of strategies in the links below and make a comment on them, so you can obtain a clearer understanding of the difference between speculating and investing and form an opinion as to where you fit on the speculating/investing continuum.

Momentum stock trading is a strategy commonly in favour when the stock market is rising in bull markets. Unfortunately, stock markets tend to fall faster than when they rise. So it is easy to get caught using this strategy.

Investors who prefer to entered the stock market using a measured approach over time find dollar cost averaging is a convenient strategy that has some advantages.

Stock trading as a strategy typified by short term buying and selling of stock based on technical analysis is one that that approaches pure speculation requiring disciplined adherance to a trading system - hopefully a good one!

You can learn to trade stock market from this free and informative site using simple strategies and patterns technique that may also predict stock market turning points often to the exact day.

The term 'stock trading' is also used to simply refer to buying and selling stock. In this sense it is an activity rather than a strategy.

International stock trading relates to using a broker to provide direct or indirect access to overseas stock markets. For this activity you need an element of familiarity with the particular overseas market as well as the individual companies that comprise it. You also expose yourself to currency risk.

Investors who prefer to not follow the crowd find that contrarian investing suits their investing style because they know that stock markets often over-react to bad news and that stocks can become out-of-favor from time to time.

The value investing approach is what I favor as my best investment strategy as it provides more certain returns over time ...

... but in times of market exuberance, it does not always provide the best returns in the short term.

Investors who are more focussed on capital gains and are less concerned with dividends favour a growth investing strategy. Growth investing and value investing go hand-in-hand.

Some investors and traders make a point of watching the Directors of companies of interest to see if they are buying or selling shares as they believe that this strategy provides a look inside the company and might signal good (or bad) news.

Another strategy called couch potato investing takes a minimalist approach to investing and does not require any deep research and time spent on obtaining advice and information. Is it too good to be true?

All these strategies, except the last, rely to a greater or lesser extent on knowing where the best sources of information and advice can be found.

Do you think it might be worth having a look at what I have to say about sources of information and advice now that you have thought about what your personal investment strategies might be?

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