April 18, 2013 § Leave a comment
There are philosophies, and from them there are strategies, that people use in investing. Each of them have pros and cons and since there is no certain method to make money all the time, as investing involves risk, you and your advisor may use several of these strategies or may even have your won less well-known method. Any strategy needs to be a good choice for you, for your risk tolerance and your goals and objectives.
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, the market or the trends in economic conditions world-wide or domestically.
Asset allocation- is a 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.
These are some of the strategies used by professional investors and advisors. You may use one, or several of them, in managing your investments. (CR9153)