Stock Market Investing Strategies
You will want to get clear on the different types of stock market investing before you make any important decisions which will affect your future. Once you do, you will be able to determine which types are going to fit in best with the goals you have set for your finances. The Buy and Hold Strategy
The buy and hold strategy is one that assumes the price of the stock will go up over time. When deciding to use this strategy you must be prepared to hold the stock you purchase for quite a while. With the way the market works, you can never have a sure bet that the price actually will rise. This strategy banks on the theory that the stock market will continue to expand and as a result the stock prices will keep going up.
The main advantage to this strategy is that while you are holding on to the stocks you won't be trading very much, so you will be paying less in commission fees and taxes.
The Growth Investing Strategy
The main goal here is to successfully identify a company's potential for growth. The reason why the companies with a high growth potential become so attractive to investors is because when their stock price continues to rise there will be an increase in the amount of investors who want to get in on the action.
When dealing with growth in stock market investing, you must consider the company's earnings per share. This is what investors look at as well as the company's revenue growth.
To get an accurate picture of everything, investors will also look at the price/earnings ratio as well as the annual earnings growth.
The reason why this can get risky is because you are often dealing with newer companies. However, you cannot get much reward without taking a little bit of risk. The more risk you take, the greater chance there usually is for rewards in the end.
The Value Investing Strategy
Those who take part in value investing are generally looking for stocks that are considered a bargain, meaning they are being sold for lower than the company's actual value.
These value stocks are the ones that have been missed by the market so they have ended up with lower prices. This could have happened for any number of reasons.
Market Timing
The key to making this strategy work is to buy the stocks at low prices and then sell them at high prices. This strategy is exactly the opposite of the buy and hold strategy, because those who employ this strategy use specific timing to sell their stocks rather than hold on to them and wait it out.
In most cases, it is highly difficult to accurately time a stock's peak price or rock bottom. You never know when the price may fluctuate. This is precisely why this method is not recommended by experts.
If you have made the decision to begin involving yourself in stock market investing, it is a wise choice to become educated on the various options you have available to you.
Article Source: FxTradingStock.com
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by: Joe Maldonado
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Date: Fri, 11 Mar 2011
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