Stock market investment strategies are like opinions, but not everyone has one. To invest in stocks without any investment strategy is to ask frustration into your financial life. If you desire to make money in stocks, begin by defining how you think to play with the stock investing game.
Contemplate these three investment strategies:
To put things into perspective let’s consider the 10-year period from 1999 through October of 2009, and what happened to the stock market as measured by the most popular stock operation index on earth, the Dow Jones Industrial Average (the DOW).
The DOW hit 10,000 in 1999. In October of 2009, it was at 10,000 again. Stock investing was frustrating for most people and was a losing proposal.
If you want to invest in stocks and relax a little, its time to make a decision that is fundamental with regard to investment strategies. How are you going to play the stock market? It’s possible for you to play with short term as a trader or speculator. At the other extreme, you can only buy stocks and hold them. And there’s a third alternative.
Traders have but few gain from market swings consistently. Furthermore, short-term speculation is at least a part-time job that needs time, effort and experience.
At the other extreme, buy and hold is a simple investment strategy and requires almost no effort. This investment strategy has created long-term yields in the stock market of 10% a year, over the long term, for the past half-century. Not through 2009. For ten years stock investing acid indigestion made not little more than the easy way for investors.
It is advisable to split the uprights down the center and kick a field goal. Don’t try to make money in stocks with short-term speculation, or by just buying, crossing your fingers and hoping for the best.
By assessing the DOW merely once a week, you can get a feel for what’s happening in the world of stock investing.
When you see extreme price movements, it is time to act. Can you spot extremes? Get comfortable with historical stock market data. A great place to begin: a long-term graph of the DOW.
By the year 2000, for instance, it was evident that stocks had gone too far too fast. The only thing was greed. Taking emotion out of the image, any rational being could have seen that stock prices had gone to extremes. The rational thing to do was to take some money off the table.
Or, look at the stock investing scenario in early 2009 with the DOW having fallen 50% in a couple of months.
Don’t view the stock market as some other complicated thing or rocket science that you can not comprehend. Learn the basics and follow the marketplace on at least a weekly or quarterly basis. Your basic investment strategy: lighten up on stocks when it looks like they have gone up to extremes. Step in and buy when there’s blood in the streets.