Investing in the stock market can bring you powerful rewards and help you prepare for retirement.
While the stock market does present a risky game, (especially lately!) you will miss all of the chances you don’t take. You shouldn’t readily shy away from risks.
Stock market investments are just one way you can build your savings. However, over the long-term, it can have the highest payoff. If you start investing in the market at a young age, you can benefit even more.
If you are trying to grow your savings, you should consider some serious stock investment strategies. Instead of letting your money sit in a low-yield savings account, you can put your money to work.
Choosing Stock Investment Strategies
If you are new to investing, you may not be sure of which strategies to employ.
Do you choose a diversified mutual fund or individual stocks?
How do you mitigate risk?
Your personality may determine the strategies you choose. You can choose short-term or long-term strategies. Ultimately, you need to be consistent in your approach.
If you like to watch things develop over time, you will likely do better with a more long-term approach. Then, you can watch as your investments grow and even become entirely new companies.
The types of investment strategies are largely theoretical. While they may be proven effective in some cases, there is no one correct way to invest.
1. Act Quickly and Smartly
Sometimes, you may catch an opportunity to buy an attractive stock at a low price. Don’t wait too long to jump on these opportunities.
If you wait to see what the stock will do, you may miss the opportunity.
Whether you are looking to buy-and-sell or invest for the long-term, speed is essential. Changes in the market can happen before you even notice. Pay close attention.
If you see a stock fall and then start to quickly rise again, buy it quickly. Don’t wait to know more.
Opinions are often wrong. You can only trust your own instincts in combination with the behavior of a graph.
This may take some knowledge of how to read graphs and predict their behaviors over time.
2. Looking for Potential Growth
With this strategy, you will look for the quality of a business and its rate of growth. Ideally, you will keep these stocks for a long period of time to allow them to grow.
The companies you buy should have excellent potential for growth in sales and earnings.
If you choose this strategy, you will likely be more concerned with new companies than established ones. Pay attention to budding industries and use your knowledge of the world to decide whether or not it will thrive.
Right now, the obvious industry to look at is technology. As technology rapidly develops so too do the applications.
There is risk involved, of course. If you are smart, or maybe just lucky, you could invest in a new company that will quickly expand.
3. Performing Some Fundamental Analysis
This may seem like a pretty straightforward process, but it can actually get pretty complicated pretty quickly. However, some analysis will help you determine how much a share is actually worth.
To do this, you will need to look at the company’s financials and determine its value. From there, you can calculate how much the proportional share is worth.
There are many ways to perform your analysis, and different investors will argue about which method is best.
At the end of the day, you will likely choose to blend different methods. Remember not to take anything anyone says as gospel.
These different methods will focus on quality, growth, value, income, and GARP.
Many people will argue that this type of fundamental analysis is of no use. They have determined that this information is freely available to the public. Therefore, it gives no real advantage.
Again, you must make a decision for yourself.
4. Size Matters
Some investors will focus primarily on the size of a company, believing that size will determine return. This is not to be discounted.
The size of a company will be measured by revenue or market capitalization. Then, you can categorize the different companies. The breakdown will vary from investor to investor but will follow a similar pattern.
- Micro Cap About $250 Million or less
- Small Cap About $250 Million to $2 Billion
- Mid Cap About $2 Billion to $10 Billion
- Large Cap About $10 Billion or greater
Trading has become a popular strategy recently. This is largely due to decreases in commission and access to instantaneous stock data.
This is a short-term stock investment strategy. Your focus will be on making a few percentage points from each trade. The returns are low, but the goal is to trade often.
This strategy can be attractive to new investors who see the potential to make a little money at a time. It resembles, in many ways, gambling in a casino.
This is an investment strategy that is dominated by investors with far more experience and far better equipment. Because of this, it is easy for new investors to fail quickly.
In general, this strategy becomes a full-time job. It requires careful attention to the market, speed, and discipline.
Some will recommend against trading. Trading is a time-consuming venture, and many people do not have the luxury of time.
Provided you do have a lot of free time on your hands, trading could be a very successful strategy.
6. Using Screens
Some investors will only invest in companies that meet a specific set of requirements. This is another method that has become more popular with the advent of computers.
A screen will allow you to look at any specific factors about a business over a period.
The benefit of using this method is its detachment from emotions. Instead of letting your emotions get the best of you, you leave the decisions to a predetermined algorithm.
The downside is that this method removes a certain amount of intelligence from the process. However, you do not have to do exactly what the machine says. You can take some freedom to make your own decisions.
In fact, it may work in your benefit to use the screen as a guide rather than a rule.
This method could give you ideas about where to invest rather than telling you where to invest. It can help you narrow down your search so you can make better decisions.
7. Combining Methods
Maybe there is no one strategy that stands out to you. That is reasonable. You may have your own ideas about how to invest.
As mentioned earlier, there is no one right way to make investments.
All of the investment strategies you find are purely theoretical. They are merely philosophical approaches to the same game.
You may find that combining methods will give you the most rewards. If you are looking to grow your savings, this is a great approach.
You should never pigeonhole yourself and restrict your movement. You do need to be consistent, though.
Do not try different methods at random just to see if they work.
You will need to develop some sort of consistent strategy that you can employ to your investments.
Make Investments: Grow Your Savings
Making investments in the stock market can be a great way to grow your savings. Although there is risk involved, you stand to gain more than you are likely to lose.
It is just one method of putting your money to work. Whether you are looking forward to retirement or saving for your future wedding, you can better secure your financial future.
If you face difficult times, you may find that you can take a loan out on your stock investments. You can learn how companies now allow you to do that with some quick research.
*More info: How to Borrow Against Your Stocks – fool.com
Securing Your Future
Everyone should be concerned about their financial future. You want to make sure you have enough money to make it through your retirement. No one wants to work until they die.
You could go from the maternity ward to grave without ever investing in the stock market, but you could be missing out on some good rewards.
The above list contains only some of the viable stock investment strategies. Remember to do your own market research and never take anything anyone says as the word of God.
This could land you in serious financial trouble.
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