Stock Investment Strategies

Unfortunately, the popular investment phrase "buy low and sell high" is much harder to actually accomplish than say. You are probably very familiar with the irony of this statement if you've ever invested in the stock market. Sometimes, it seems like buying high and selling low is the only strategy you are actually good at!

Picking a Stock Investment Strategy

To be a successful investor, you'll need to pick one strategy and stick with it. One of the best strategies for maintaining a solid investment plan is called dollar cost averaging (DCA). DCA requires you to take a specified amount of money and invest it on a regular basis, regardless of how the market is performing on that pre-selected day. An example of dollar cost averaging is investing $200 on the first of every month.

This investment strategy forces discipline onto otherwise precarious market investors. Any investment professional will tell you that DCA is actually the most efficient investment plan because it takes the emotional aspect out of investing. When investors become attached to certain stocks, it can be difficult to persuade that investor to sell at the appropriate time. Many people lose handsome gains by hanging on for too long.

Dollar cost averaging works especially well when you're investing in mutual funds. Buying into a particular fund on a regular basis helps average out your net asset value (NAV), providing higher and more consistent returns in the long-run. Although DCA is a proven and efficient method of investing, you don't want to blindly invest your money. Active management is still essential for continued success.