Investment strategies

Written by Michael McAlary

There have been many books about investment strategies. The common themes of the strategies are to research your decisions and diversify your investments.

Some strategies are:

  • Buy and hold. This is to buy a stock and hold it through good and bad times.
  • Contrarian. This is to buy when the market is generally selling (falling) and to sell when the market is buying (rising)
  • Market timing. This strategy is to try and pick the ‘peaks and troughs” of the market, so be the first in the market after its bottomed and first out before it falls
  • Trend following. There is an old saying that the “trend is your friend”. This strategy is to buy in a rising market and sell in a falling market, i.e. follow the trend
  • Trading strategy. There are many different trading strategies, e.g. Long short. The idea is to determine a strategy and stick to it. Quantitative Trading (algorithmic) models. These are sophisticated models that look for market “signals” on whether to buy or sell. Examples of models are the Dow Jones “Dogs of the Dow” which is a 365 day cyclical model
  • Liability driven strategies. This means taking a holistic view of both the assets (investment) and liabilities (funding) scenarios. This strategy is particularly relevant when using gearing strategies to create wealth
  • CANSLIM. This is a growth stock strategy. The aim being to identify growth stocks before they take off
  • Index tracking or investing. This strategy is based on the premise that in the long run the index will outperform stock picking
  • Momentum. This strategy involves buying stocks or securities that have had high returns in recent years and selling those that have had poor returns. This can also be viewed as an example of a trading strategy
  • Fundamentals. This is using fundamental company data, comparative market benchmarked data to determine the value of stocks to determine whether a stock should be brought or sold
  • Technical Analysis. This strategy is based on historical trends/behaviours that “indicate” future trends

As outlined above there are many different types of strategies and there is a lot of noise that makes it confusing. The best advice is not to invest on a tip or a hunch. Do some homework and seek advice. WealthMaker Financial Services can offer advice and assistance in structuring your investment portfolio, click on the Contact button above or call us on 02 9233 1111 for more information.

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