Investing in markets is an attractive activity because of the fact that it can yield profitable outcomes. However, investing can also seem scary because there exists the risk of losing money instead of making money. To make it more likely that you will make money instead of lose money, it is wise to study a variety of investment strategies that have been implemented by professionals. Since these strategies have been in play for some time now, you will be able to see what works and what does not give your unique circumstances. In this article I will explore 5 investment strategies that have proved to be successful.
The Historical Strategy
This strategy is arguably one of the most basic and therefore one of the easiest to understand. This strategy involves analyzing the recent performance of stocks and then investing according to their performance. If a stock is performing well or increasing in value, then you should invest. If a stock is performing poorly or decreasing in value, then you should not invest. Of course, whether or not you invest may depend according to how long you plan to hold onto the stock for. If you plan on holding onto the stock for a longer period of time, then you might want to invest in a stock that is decreasing in value in the hope that it will experience a larger increase at a later point.
Buy and Hold Strategy
This strategy may be seen as a variation of the preceding one in that you invest in particular stocks according to the historical performance but in this case, you hold onto the stock for a much longer period of time. This means that you do not sell the stock as soon as the value increases. The idea here is that, by holding onto the stock for a long period of time, you do not need to worry about the volatility of the stock quite as much because an equity market should give good returns over a long period of time despite the uncertainty inherent in the value of the stock. If you are interested in starting your investment journey check out Binary Trading Australia.
The indexing strategy is one in which you invest in a small portion of every share in a market. With this strategy, it may be better to hold onto these shares for a long period of time or it might not be depending on what market you have invested it. Whether you hold onto the shares for a long period of time or not is something that you will have to decide as you go. If you decide to hold onto these shares for a long period of time, this type of investing will prove to require rather minimal management since you merely have to invest and then sit back and watch what happens.
Intrinsic Value Strategy
There are two competing strategies that have both had successes as well as failures and these are the intrinsic value strategy and the future growth strategy. The intrinsic value strategy involves the analysis of a stocks intrinsic value. This means looking at the stock in terms of its current value. If the value is high, then it is reasonable to invest but if it is low then it might not be reasonable to invest. This strategy is rather straight forward but can become more complex as you consider more and more aspects of the stock. This would mean looking at the stock in a larger, macroeconomic context.
Future Growth Strategy
This strategy, as opposed to the intrinsic value strategy, looks at stocks in terms of their hypothetical future value. This strategy might require more experience in the markets because you must have a good idea of how the stock will change over time. Growth investors often invest in, what they take to be, undervalued stocks. This potentially allows them to purchase larger shares for cheaper (since less people invest in low value stocks) and therefore receive larger returns if their future projections were correct.
The 5 investment strategies that I have briefly described here have all had their own moments of success. However, all of them have had their failures as well and this is why there is dispute over the best way to invest. The bottom line to this is that the market is dynamic so what works best will depend on what is happening in the market as well as what your particular financial situation is.