Investing Strategy

Any investing strategy must be compatible with your psychological make up or personality. By that I mean the investing strategy you select should be related to how much risk you can accept. That is you need to be comfortable with how much you are prepared to lose and not be so worried that you cannot sleep. You are either risk averse or a risk taker.

Successful investing does not just include buying stocks or shares. You have to be very clear on what your goals are before you begin any investing strategy. There is an organization that helps you set your goals and then provides a step by step guide on how to achieve your goals that is very clear, very concise and very profitable for those who are wise enough to know that it is better to follow the world's best traders than to try and figure it out yourself.

No matter what investing stategy you decide is right for you be prepared to lose on some if not most of your investments. No body, not even Warren Buffet has a 100% success, no matter that his investing strategy is probably second to none. Warren Buffets strategy looking in from the outside is to buy low and hold long term, maximizing growth or capital appreciation.

There is no investing strategy that will maximize profits 100% of the time. There are so many external factors that influence stock markets that no one can forsee. A prime example is the BP oil leak in the Gulf of Mexico, it has had a big influence on the share price of BP.

Depending on which investing strategy is suitable for you, you are still able to make money if you are wrong 90% of the time. An investor using the strategy of buying EFT's and selling on the trends was wrong 90% of the time yet still managed to turn a $10,000 dollar investment into $200,000 plus in slightly less than two years. That was exceptional but he had a disciplined investing strategy of cutting losses quickly but maximizing gains.

This particular investor did this by setting a stop loss price at a price level he was comfortable in losing. Most people do not want to lose more than 2% on any one trade. His risk percentage was closer to 5% and he is/was an experienced share trader. Also as was said above he was disciplined in all of his dealing. His investing strategy parameters were set and he stuck with those parameters. Many unprofessional share traders are not disciplined and allow greed or emotions to cloud their judgement when buying or selling shares and derivatives.

There are many different investing strategies that can be used both stand alone and sometimes used together depending on investing personalities. Some of the more common strategies are:

1. Buy low, sell high. That is common sense. The difficulty with this strategy is that no one knows with any certainty what is going to be the low price or the high price.

2. Buy and hold for the long term. Again common sense you are buying for the long term where you will benefit from capital appreciation and often dividend distribution. You also eliminate short term volatility which frightens some share investors. If this is your investing strategy then you should reinvest all dividends back into company shares as well. Some companies with strong cash flow pay out excellent dividends. These dividend rates are often much higher than interest rates you will receive from banks.

3. In fact another strategy is to buy bank shares rather than put your money into the bank to earn interest. Historically you will earn far more with this strategy than just leaving your money in the bank or under the mattress or in a tin can that many poorly educated in finance people once did and some still do.

However today bank stocks are no longer as safe as they once were, especially in the USA. The reason for this is that the banks in their basic greed created investment products that had and still do have great risk.So far this year up to July 2010 there have been some 80 plus banks fold in the USA.

4. There is a trading strategy where you buy and sell relatively quickly. You look for small gains. You get in and get out of a share. You look for and follow trends as exampled above. You need to closely follow the markets for this investing strategy to work. Although with computer trading you can set loss limits that will prevent a portfolio crash because you were not able to or simply were not attentive to the trading trend.

5. Some investors like to be contrarian. That is when the crowd is selling they buy and conversely when the crowd is buying they are selling. This can be successful but equally if you choose the wrong stock that is actually going bankrupt you can lose heavily. Any investing strategy must be determined by the individuals risk personality as described before.

6. You can adopt a risky investing strategy by margin trading . That is borrowing money to buy shares. With $10,000 you can buy 500 shares at $50 and make $500 when the share price moves to $51. Or with a margin trade you can have $10,000, borrow another $10,000, buy 1000 shares at $50 and make $1000 when the price moves to $51 minus your interest in borrowing the $1000. Even if you paid 10% interest you would still be $400 better off. This is risky strategy because if the share price falls to $49 you will lose either $500 without borrowing but if you did borrow you would lose $1100 based on the above figures.

7. There are strategies within an investing strategy. Instead of trading shares you can trade ETF's (Exchange Traded Funds) or futures or options rather than the actual shares.

As said before any investing strategy is all about the individual's investing tolerance to risk management. But primarily it is about having goals that have been emotionalized. You can click this link or the link below to find out how that is done by ProphetMax that is totally based on value, honest information, integrity and love of people looking for peace, freedom and passive income.

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