The best investment strategies are concerned about intrinsic value

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The Best Investment Strategies Include Value Investing

Know how to 'play' the stockmarket!

As a stock market investor I focus on the best investment strategies to 'play' the stockmarket with the best stock investments. Value investing is the approach I adopt.

There are a number of strategies being employed to buy and sell stocks ... and you have probably come across many of them already. They can be roughly divided into speculative strategies and investing strategies.

Investors 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.

Comparison

How do they differ? There are a few characteristics that can immediately distinguish speculative from investing strategies. 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 require hourly or daily attention so 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 so can be managed as a supplement to other income.

As suggested above, I favour investment strategies, as I prefer value investing with longer-term certainty rather than shorter-term uncertain gains.

As you make investment decisions, consider the differences listed above and decide 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.

Review of Strategies

I review a range of strategies in the links below and make a comment on each so you can have a clearer understanding as to where your preferred strategies 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 that dollar cost averaging is a convenient strategy that has some advantages.

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

Bettertrades software has been developed by people who trade the stock market. Real time markets is the perfect tool for this fast, ever-changing market.

You can learn stock market trading from this free and informative site using simple strategies and a 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 the investing strategy 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.

Porters Five Forces sector picking strategy attempts to pick the best stock sectors based on a set of four desirable characteristics.

Having determined the most desirable stock sectors, the aim is then to pick the best stocks in the best sectors.

Investors concerned about receiving a healthy cash flow from their stock investments may follow a dividend investing strategy.

Stocks paying large dividends are commonly referred to as high dividend stocks, high yield dividend stocks or simply dividend paying stocks.

This is one of the best investment strategies for people who are investing during retirement. Retirees commonly look for high yield dividend investing.

This can result in tax efficient investing if the payments are fully franked.

Fully franked shares are those for which the earnings of the company have been taxed, and are subsequently not further taxed in the hands of the shareholder in the form of dividends.

Not all countries have eliminated this form of double taxation by providing franking credits.

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 any moves by a company insider of a company of interest, such as a director or CEO, to see if s/he is buying or selling shares.

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?

To Conclude

My experience suggests that the best investment strategies are those incorporating value investing which takes a longer term approach to investing in the stock market. All strategies mentioned require discipline or patience - or both in the case of value investing.

All these strategies, except coach potato investing, 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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