Stock Market Strategies
Hello fellow Bullhunters
The Bullhunters Guide to the US Stock Market has certainly been an eye opener for me and I think we got more than what we bargained for when Sean wrote this eBook and offered us a free download of it. Although the information provided us is short and sweet, it is all very useful information which gives us a look behind the scenes at the goings on of the US Stock Market.
Today we will be discussing some other ways that you can make money from the stock market so here is the next excerpt…
Buy and Hold - The Classic Value Strategy
Conservative stock investors like to buy undervalued stocks and hold them until they are fairly valued (or even overvalued). Many times, these investors concentrate on dividend-paying stocks.
Buy and hold proponents feel that the market is often irrational in the short-term. Good stocks can go down; bad stocks can go up. But in the long run, they believe that the cream rises to the top. Buy and holders aren’t concerned with the day-to-day fluctuations of their portfolio. They take their time before buying a stock and by the time they pull the trigger, they’re confident that they’ve made the right decision. When their stocks suffer substantial losses, they often buy more. This is called buying on the dips.
By buying on the dips, investors lower their cost basis. For example, if an investor bought 100 shares of Ford for $10 and then bought another 100 at $9, his basis would be $9.50 per share - ((100*$10)+(100*$9)) / 200. When the stock hit $11 he would have a profit of $1.50 per share instead of just $1.00 per share.
Aggressive Growth Investing
Not everyone agrees with the buy and hold strategy. Aggressive investors think that they can maximize their profits by trading more frequently. They see no reason to hold a stock when they think it is going to go down. Why not just sell it, and then buy it back when it has bottomed.
Buy and holders think this sort of philosophy is conceited. They say that frequent traders are trying to outsmart the market which is something that cannot be done on a consistent basis. Buy and holders also point out that the commissions associated with frequent trading can take a big bite out of profits. But aggressive investors still say that their way produces better results.
Aggressive vs Conservative Strategies
These two strategies are from one end of the scale to the other. They speak for themselves. So whether you want to make a quick profit or be on the conservative side and buy and hold, there are pro and cons for both. It also depends on if you are building a portfolio or trading for cashflow. This is something that only you can consider and also be aware of whether these strategies fit into your trading system. They may or may not and there are other strategies to consider like renting shares for cashflow which is more conservative than day to day trading.
We are not done with the Bullhunters Guide yet. There is more on the way so keep an eye out until next time.
To Your Success
Angela Recchia
Graduate Support
Universal Wealth Creation © 2004 - 2007
