Stock trading or stock investment is an art which cannot be learnt in a single shot. It is continuous learning process that comes with the real time practice. Along with the subjective approach to use the right approach at the appropriate time, there are some scientific guidelines of how to design a procedural portfolio according to your needs and personal characteristics. The guidelines collectively are known as Stock Investment Strategies. These strategies are a guide to stock traders consisting of systematic set of behaviors, market rules and action plan. These are several in numbers and categorized according to the characteristics and differential features of each. However the Stock trading strategies do not offer a guarantee of lucrative return every time. Here we go a list of most popular and practicable investment strategies that could aid your stock trading, indeed.
1. Bottom-up Investment Strategy
It is the most practiced investment strategy. It provides a basic pattern to get a road map to invest. In the underlying strategy, the investor will have to analyze the economic situation of the country in which he intends to invest. If the economy is growing by leaps and bounds, industry flourishes, and crops are green, it would signal a competitive and dynamic market activity. Hence investor can take more risk by investing in growth stocks of large cap firms. But if the economy does not picture a stable anticipation, the investor would rather go for income stocks (of mature firms) to eliminate the potential economic and systematic risk.
2. Buy and Hold Strategy
According to the several characteristics of investors, it is referred that the old age investors are leaned to invest in minimal risk yielding stocks for long term investment as continuous source of earning. The strategy offers to invest in income stocks which remain stable in almost every situation i.e., bullish or bearish market.
3. Dogs of the Dow Strategy
O’Higgins proposed this strategy in 1991 elucidating that every investor will have to choose ten stocks from the Dow Jones industrial average’s which are highest dividend yielding (compared to the proportion to the price of underlying stock). Conventionally it only includes the stocks of blue chip companies and the stocks are correctly valued. There is no place of value stocks in this strategy. This is not for the speculation. Long term investors can get large benefits from this given that heavy investment is required to plunge in. Small investors rather could not be able to extract anything good out of this strategy.
4. Trend Following Strategy
The stock traders having expertise in technical analysis can have assistance from this strategy. This is an expert level tactic to design or alter a portfolio; hence the beginners are not suggested to jump in with this one. It aspires to get the benefit from short term, medium term and longer term categories of the listed stocks. It is a complete package to implement over a portfolio. The stock traders associated with this strategy are needed to stick with every update in moving averages, current market price fluctuations, market efficiency indicators, daily quotes, and channel breakouts in order to determine the investment signals for valuation of the portfolio. Amongst all, this strategy is very effective but this is used on a minimal level because of high level of inherent complexity and gaming of figures.