Which Investment Strategy Suits You Best?
Stock investing gives you an ownership over physical shares. There are several popular and common investment strategies out there. Knowing the one that suits you best plays a big role on whether you will succeed or not.
“Buy-Low, Sell-High” Strategy
The main goal of a “buy-low, sell-high” investment strategy is to purchase shares just when they are undervalued then sell them off once their reach their real market value. Fundamental analysis will help you identify if a stock is undervalued according to company earnings, technical innovations and leadership decisions that can cause a future increase in the stock price.
The buy-and-hold strategy is where you buy a stock and hold it for an extended period of time even when there are fluctuations in the value of the stock. When you use this strategy, you would believe, according to your own technical and fundamental analysis, that the stock of a company has a high chance of enjoying an increase in value after some time in spite of its value at the moment.
Breakout Investment Strategy
With the breakout investment strategy, you will have to wait until the underlying stock’s price gets broken through a level of the historic resistance prior to opening a position for investment. A resistance level is being used in the technical analysis and represents the historic ceiling of the value of a stock. Once the price manages to break through this level, it can indicate that the stock is going to achieve future higher highs.
How Do You Choose Your Investment Strategy?
You need to consider several factors when choosing your investment strategy. You might want to consider how you can get the highest returns after some time and the possible risk to reward ratio combined with your personal risk appetite.
How Investors Earn the Highest Investment Returns at the End of the Day
Investors who actually spent time in the market were the ones who were able to enjoy the highest returns over time instead of those who try to time the market.
Time in the markets refer to the long term strategy of buy and hold wherein the investors seek to boost their profits through maintaining a long-term position. Statistics reveal that a buy-and-hold strategy provides an opportunity of achieving the best returns after some time.
Investors who want to time the markets are those who effectively look to sell high and buy low. For instance, most investors were able to make the most out of the sudden drop in stocks all over the world due to the coronavirus. They bought for a fraction of the true value of the shares only to sell off their positions when the markets embark on their road to recovery.
Probably the most important thing you have to remember before you invest is the fact that there is no such thing as one right time for investing. You need to carry out both technical and fundamental analysis for every individual company to best determine the good time for investing in the stock of a specific company.