March 22, 2013 § Leave a comment
As you make up a plan for investing your money, or as you work with an advisor, I’d like you to be aware investment philosophies, that then become strategies, commonly used in the investing. Each strategy has pros and cons. And since there is no certain method to make money all the time, (as investing involves risk which by its very nature includes uncertainty), it helps to see if other methods might be right for you. You and your advisor may already use one, or several, of these strategies. You may even have your own less well-known method. Any strategy needs to be a good choice for you, for your risk tolerance and your goals and objectives.
Here are some of investing methods.
Market timing – can be anything from day trading, trading on today’s news or news over a short time horizon to trend trading seeking to move with economic conditions. Market timing seeks to predict the future direction of a single stock or the market or economic conditions world-wide or domestically.
Asset allocation– is method of spreading investments over different ‘classes’ of investments, such as bonds, stocks and cash. As with all investing any asset allocation should be done based on your risk. The mix may depend on your time in life, your need for income or safety, etc.
Buy and hold – This strategy can be used with asset allocation or any of the other strategies. It is a passive investment strategy, meaning it is hands-off. You make a purchase and you hold it for a long time.
Dollar-cost averaging – this is a strategy in which you buy systematically or without real concern for the lows and highs of an investments price. Sometimes the cost may be higher, and at other times in economic dips, the price may be a bargain. But it is the regular contribution that helps balance the cost out in the end. This is one of the strategies used if you invest regularly in your work’s retirement plan.
Value investing– is another investing strategy in which you look for underperforming sectors or stocks that you believe, because of various equations or ratios, may eventually produce a good return. This strategy seeks to find a bargain others may not see to capture short-term or long-term eventual rise from the bargain price paid for the stock to the hopefully higher sale price some time later.
As I said before, you and your advisor may use one or several of these well-known methods. These are strategies used by professional investors and advisors. (CR 9077)