Share this Page URL

Lesson 13. Choosing a Strategy - Pg. 74

74 Chapter 13. Choosing a Strategy In this lesson you will learn about methods used to determine how to put together your own cus- tomized investment portfolio. Investment Strategies Still with me? Okay, you've decided what you want to accomplish by investing, and you know what kind of stocks you are looking for. You have a handle on the potholes that can hold you back, and you've learned how to number-crunch to analyze a stock's performance. You have one step left: deciding how you will apply all this knowledge to your investments. This is both the easiest and the most difficult step of all. Think of it as buying a car. You've done your research: You've compared the prices at other dealers, you've checked the prices of comparable cars. You've checked the car sales market to find out how this brand is selling and when the best time to buy one is. You've even spoken to prior customers to learn just how the salesmen here haggle. What's your initial offer for the car going to be? How much will you accept for payments? What options do you want in the car? It's time to start making some real choices. An investment strategy is rarely black-and-white. Instead, investment strategies are usually a mix of the different options available. My own experience has been that as my portfolio grows, my in- vestment options grow in direct proportion. In addition, the number of investment strategies repre- sented in my portfolio grows, also in direct proportion. Investment strategies, like investment ob- jectives, should remain fluid in order to adapt to the different circumstances in which you will find yourself, as well as to accommodate any new ideas you yourself will come up with. Plain English Picking an investment strategy is the process of determining what information will be most important in your stock selection, how many of each stock you will purchase, and even how and through whom you will purchase that stock. An exhaustive list of investment strategies is impossible because they are as individual as the people who employ them. Stories circulate about people who pick their investments by using dart boards, astrology, and (so I've heard) even monkeys. As a new investor, however, you should be aware of some of the more popular (and saner) methods people employ for investing in their stocks: · · · · · The recommendation strategy The research strategy Buy and hold Dollar cost averaging Constant dollar averaging Mix and match as you see fit; take what you want and leave what you don't like. In the world of investing, the only right answer is yours.