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 stock market 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.
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 favor 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 involving a fixed input of funds each month or two find that dollar cost averaging is a convenient strategy that has some advantages - but not one of my best investment strategies.
A similar approach which varies the amount invested each month or two depending on whether the market has gone up or down is referred to as a value averaging strategy.
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 adherence 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 stock trading strategies and patterns technique site 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.
Seeking Wider Horizons
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.
You may also need to be prepared to pay higher brokerage costs in order to purchase individual foreign stocks.
However, investing in overseas markets provides access to market sectors that may not be available in your home market and may turn out to be one of your best investment strategies.
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.
Investing for Value
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.
Joel Greenblat also adopts a value investing approach with his magic formula investing strategy.
Sector Picking Strategy
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.
Generating an Income Stream
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, cash cows, 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. The downside with this strategy is that high-yielding stocks tend to be low-growth stocks
Nevertheless, this strategy can result in tax efficient investing if the dividend 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 focused on capital gains and are less concerned with dividends favor a growth investing strategy.
Growth investing and value investing tend to go hand-in-hand. Warren Buffett has said that these two strategies are ... "tied at the hip".
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, particularly if s/he is buying shares.
They believe that this strategy provides a look inside the company and might signal good 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?
For investor who would prefer to have a portfolio of shares constructed for them, based on their risk tolerance and time horizon, may prefer to use one or more model stock portfolios. These are provided by different financial groups who attempt to cater for a range of investor requirements.
Managing Portfolio Volatility
Investing in a range of asset classes including cash, bonds, property and shares will invariably result in some level of volatility in the returns from a portfolio depending on the proportion of each asset class in the portfolio.
Investors can use an optimal asset allocation strategy to achieve a level of volatility that they are comfortable with.
Low volatility can be achieved by a concentration on cash and bond investments whereas a more volatile portfolio has a greater concentration on shares and property.
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.
Given the current investment climate (early 2013), I am also invoking a magic formula approach which employs value investing over a shorter time frame.
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 best investment strategies might be?
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