Stock Market Investment Strategy

Formulate a Trading Strategy and Stick With It

by John Erwin





Whether you are a veteran stock invester or completely new to stock trading, you should take time to formulate a detailed stock investment strategy and set a schedule to periodically review your actual investment activity to be sure you are following your plan. Your stock market investment strategy is your long term overall plan for investing your capital. Your strategy will be made up of tactics for accomplishing your long-term goals. Of course, you should also have an overall personal financial strategy, of which stock trading is only a part. Other parts would include emergency savings, life insurance, non-stock investments, etc.

Your approach to stocks and investing should include an intelligent mix of value stock investing, growth stock investing, penny stock investing, and both short-term trading and long term investing. You should assess the relative risk of all of your investments and keep a balanced approach to trading and investing. For example, a penny stock investment can be extremely volatile. Penny stocks can easily rise several thousand percent in a year, but they can also go to zero just as fast. So, any money you risk on a penny stock investment should be balanced (over strongly overbalanced) by conservative investments in bonds or low risk large capitalization company stocks.

In a balanced overall strategy of investing the stock market should certainly be a part of your plan. Just remember that not all stocks carry the same level of risk. Also, compared to frequent stock trading investing for the long haul can minimize risk. So, the best stock investment strategy balances risk while seeking high returns.

The investing and trading tactics you use will come together to form your overall strategy. Will you use a full service broker or do you prefer online stock stock investing where you make all of your own decisions? A full service broker can provide valuable tools and research to you, but trading online with a discount broker will save you a lot of money in commissions. If you plan to formulate and use your own trading system, then a discount broker is a good choice, but if you rely on your broker for stock investment advice, then a full service broker is the way to go.

Once you formulate your stock investment strategy, write it down and review it periodically to keep yourself on track. Feel free to adjust your strategy if your returns are not what you expected during the planning stage, but do not make too many changes too frequently. A well thought out plan effectively executed will get you where you want to go financially.

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For rational and objective information about trading and investing to secure your retirement, visit the rest of our site and take advantage of all the trading education resources you will find there.


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