The stock market has always attracted big investors and small-time traders alike. The stable job-holder, government employee, freelancer, and the occasional homemaker have all tried their hands at investing money in the stocks and make some money on the side. Heck, some people are self-taught investors who rely on their daily earnings from stocks to make a living. Then, we have specially trained and experienced stock-traders who buy and sell stocks for their clients to make generous profits.
What do all of these people have in common? Their professions, lifestyles, experience levels, and training are vastly different. Market experts like Benjamin Graham stated that they have an understanding of share market investments and market speculation. While an investor defines any personal dealing with securities, a speculator tries to demystify the investor psychology and its effect on the stock prices. The levels of understanding indeed vary between each group. You can comprehend that by checking out the different investment strategies each group adopts.
Thanks to the volatility of the market and the high levels of heterogeneity of the stocks, there is no “one true strategy” of investment that works for everyone. So, we are here to highlight some of the best working strategies that have helped hobby investors, curious beginners, veteran stockholders, and professional traders battle the bearish tendencies of the market.
- General trading – When a person anticipates the tendencies of a market from the averages. Ideally, you should wait and invest when the market is clearly bullish or bearish. That will help you anticipate the direction of the trend.
- Investing in growth stocks – Relying on the long-pull selection or growth stocks defines the selection of stocks that have the chance of growing more than the average company stocks in the market.
- Buying cheap and selling expensive might sound like the simplest of all strategies, but it commands a thorough understanding and scrutiny of the market. Regular monitoring will help you understand when the share prices are at their lowest best and when the demand is at their highest so you can sell well above the purchase price of the company share.
- Selective trading involves picking only those stocks (like the growth stocks) that will do better than the average market in the next one or two years. It is similar to the long-pull selection strategy, but it only pertains to medium to short-term investment periods.
- Bargain Purchases – If you have been around the block for long enough, you will know when a stock is selling way beyond its true price. Investors are always looking for such stocks since they have the utmost potential to sell dear shortly. The Determination of bargain stock prices depends upon monitoring techniques and specialized tools.
According to Benjamin Graham, any of the “buy low and sell high” strategies should work for the short-term investors, who have a clear understanding of the market. Daily trading is for those who know how to use the share market analysis tools. That group includes professional traders, people receiving the assistance of trained investors, and a few self-trained veterans, who can speculate the moods of the bull and the bear well enough.
Why is daily trading not the job of the common investor?
For the common person, making sense of the daily ups and downs of NIFTY can be tricky. Several factors contribute to the crests and troughs in the market graphs, including the top 50 Indian company stocks. However, the prices of these 50 company stocks or the NIFTY 50 index impacts the value of every other share in the market. Unless someone understands how the change in the NIFTY index can affect their share prices in advance, they face a high risk of losing significant share market investments from selling too early or holding too long.
One of the most stable and foolproof strategies is to buy stocks considerably cheaply and hold them for a long period. Studies show that, while a stock price can show severe fluctuations over a 24 hour or even a 30-day period, the value most definitely rises over extended periods (more than a year). Even when the market is at its bearish best, you should be able to hold on to the stocks to ride across the unpredictability into the bull market. Holding on and laying low without selling too hastily may help you make a decent profit from the stocks you already have on your portfolio.
If you are indeed thinking about long-term investment strategies, there is no reason for you to worry much about the ephemeral dips and rises in the prices. You won’t even have to check the prices or market trends every hour, every day, to make the best of your selling opportunities. Wait for a market crash or a recession, and buy stocks of companies that you know will pull through. Don’t just rely on big names. Read up a few predictions and consult with professionals while choosing the companies. Let them sit pretty on your portfolio for a couple of years. You will witness some pretty amazing things, including seeing them grow and, sometimes, morph into entirely new companies that are worth a lot more than the original one!
The share market can be a beautiful place that nurtures your surplus cash and boosts it into a fortune. Or, it can be an intimidating battlefield that commands regular scrutiny, analysis, and strategizing. The investment strategy you choose will determine how the entire share market experience (and the future of your fortune) unfurls. Sticking to long-term, growth-stock investment plans will also help you build an impressive portfolio without consciously paying much attention or effort to it.