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Stock Market Strategies and Analysis
In furthering your stock market knowledge, you should acquaint yourself with the different kinds of stock market strategies and the reasons or rationalization behind them. You can then choose which type of strategy you would want to employ.
As you probably know there are two ways to earn profits in stocks. You can either get your dividends or EPS (Earnings per Share), which represents your piece in the corporation's profits pie, or you can sell your stocks to earn profits. This is called earning capital gains. In general, there are two investment approaches or strategies in handling your stocks to earn those capital gains: the conservative strategy also known as the buy and hold strategy and the aggressive strategy or the aggressive growth investment.
Buy and Hold
Buy and hold investors, as the name may suggest, often choose to buy stocks and hold them until they feel that they can earn the most. These investors usually prefer to buy undervalued stocks or those stocks that have prices per share that are lower than they actually should be. Buy and hold investors are not irrational in buying and selling stocks, often they asses the stock's situation and possible market recovery before they buy any stocks. Conservative investors are not concerned about the daily stock price fluctuations. Even if the stock they already bought goes down in terms of price, they even buy more of it. This is called buying in the dips. The reasoning is that the price decrease is only temporary and once the prices increase again, the investor can earn more money by selling the stocks in a much higher selling price than the price he bought it for. This is actually the whole reasoning of the conservative investors. They buy undervalued stocks and hold them until the price of the stock catches up. Most buy and hold investors are confident that through time, the truly valuable stocks will have higher prices, even if they do not seem so at the time the investors bought them.
Aggressive Growth Strategy
Aggressive investors have the opposite strategy with the conservative investors. They believe that buying and selling stocks more often is the way to go. Instead of buying in the dips, they prefer to buy when the stock prices are increasing. They believe that since the stock prices are going up, they can sell the stock at a higher rate than the rate they bought it. Buy and holders believe that buying and selling frequently takes a toll in your profits as more broker commissions are being deducted. Aggressive investors believe, however, in cutting their losses which means that when a stock prices hits a certain price low, they sell it no matter what happens. This is contrary to the buy and hold strategy that buys more stocks until the stocks hit $0.
I think that both strategies represent two kinds of investment personalities: the conservative investor, that is patient, confident, analyzes the corporations financial data than its stock price records and more of a risk taker than the aggressive investor, which is a person that wants to see results instantly, with little or no waiting, is also a risk taker but is more on analyzing the stock price behavior rather than the corporation's financial record. I'm sure you can relate to some of these personalities. Would you rather be a conservative or an aggressive investor? Only you can answer that.
As you probably know there are two ways to earn profits in stocks. You can either get your dividends or EPS (Earnings per Share), which represents your piece in the corporation's profits pie, or you can sell your stocks to earn profits. This is called earning capital gains. In general, there are two investment approaches or strategies in handling your stocks to earn those capital gains: the conservative strategy also known as the buy and hold strategy and the aggressive strategy or the aggressive growth investment.
Buy and Hold
Buy and hold investors, as the name may suggest, often choose to buy stocks and hold them until they feel that they can earn the most. These investors usually prefer to buy undervalued stocks or those stocks that have prices per share that are lower than they actually should be. Buy and hold investors are not irrational in buying and selling stocks, often they asses the stock's situation and possible market recovery before they buy any stocks. Conservative investors are not concerned about the daily stock price fluctuations. Even if the stock they already bought goes down in terms of price, they even buy more of it. This is called buying in the dips. The reasoning is that the price decrease is only temporary and once the prices increase again, the investor can earn more money by selling the stocks in a much higher selling price than the price he bought it for. This is actually the whole reasoning of the conservative investors. They buy undervalued stocks and hold them until the price of the stock catches up. Most buy and hold investors are confident that through time, the truly valuable stocks will have higher prices, even if they do not seem so at the time the investors bought them.
Aggressive Growth Strategy
Aggressive investors have the opposite strategy with the conservative investors. They believe that buying and selling stocks more often is the way to go. Instead of buying in the dips, they prefer to buy when the stock prices are increasing. They believe that since the stock prices are going up, they can sell the stock at a higher rate than the rate they bought it. Buy and holders believe that buying and selling frequently takes a toll in your profits as more broker commissions are being deducted. Aggressive investors believe, however, in cutting their losses which means that when a stock prices hits a certain price low, they sell it no matter what happens. This is contrary to the buy and hold strategy that buys more stocks until the stocks hit $0.
I think that both strategies represent two kinds of investment personalities: the conservative investor, that is patient, confident, analyzes the corporations financial data than its stock price records and more of a risk taker than the aggressive investor, which is a person that wants to see results instantly, with little or no waiting, is also a risk taker but is more on analyzing the stock price behavior rather than the corporation's financial record. I'm sure you can relate to some of these personalities. Would you rather be a conservative or an aggressive investor? Only you can answer that.
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