Investing strategies

Investing strategy can be understood as set of rules that guide investor in his decisions regarding investment portfolio. Investors use strategies to balance risks and rewards in accordance with his risk tolerance investing goal and investment horizon. Taking time to understand which strategy suits you the best can also help you avoid unwanted expenses.

You can look at it as existence of two extremes where on one side are investment strategies that seek rapid growth which includes greater amount or risk and on the other side is low risk strategy with regular dividends payment that is more concentrated on wealth protection. In other words there is always some kind of trade off between risk and return on investment and most investors are not in the one of those two extremes but somewhere in between. You should honestly assess your current financial situation, your expenses and debt and how much you are able to invest.

Investors using value investing seek stock that they believe are undervalued. Often what is taken into consideration is bigger picture not just temporary performance. Growth investing like the name says is focusing on the companies with growth potential that show strong and consistent earnings and revenues.

Momentum investors believe in current situation, that winning stock will remain that way. Investors select stocks based on their recent past performance using technical analysis and looking for patterns.

Dollar cost averaging can be used with already mentioned strategies. It is a strategy where you invest regularly over time and reducing risk in that way. When investing on regular basis chances are that you will capture prices of all levels and lover the average cost per share purchased.

Index investing is passive strategy where investor is trying to generate the same results like market index (SP500 for example) usually by buying ETF that tracks the underlying index.

Dividend growth investing is a strategy that involves investing in a company shares according to the future dividends forecast to be paid.

You will need to decide what is the best strategy for you, do you want to take passive or a more active approach, how much risk are you willing to take are just some of the questions you will need to answer. In the end choosing any strategy is better than having no strategy.

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