Find a Stock Investing Strategy that Works for You

Investing in stocks can be as simple or as complicated as you want to make it. The important part of that sentence is the personal pronoun “you.”

Too often investors are led to believe that investing in stocks must be a complicated, deeply analytical process involving hours of pouring over financial statements, analysts’ reports, spreadsheets and market analysis before making a decision.

For some investors, this is the only way they feel comfortable investing and they enjoy the digging for information as much as the actual return on investing.

What Works

The complicated analytical approach to investing works for them, but that doesn’t mean it is the only way to successful investing or that it works for every investor.

You may not have the time or educational background to do the complicated financial analysis of every stock you make buy. Does that mean you will be less successful?

Not necessarily, some investors who do tons of research still get it wrong. Still, what can you do to improve your chances for investing success if you aren’t the analytical type and don’t have a lot of time to devote to research?

• Keep the number of targets small. Set your parameters tight to limit your universe. For example, say you’re interested in the health care industry. Pick out a sector in that industry and focus on the leaders (market leaders, not price leaders).
• If your objective is growth, invest in growth industries. This may seem obvious, but it is easy for investors to get side tracked. You will probably do better with a so-so company in a growth industry than a great company in an industry that’s going nowhere. If you want growth, invest in technology or one of the other growth industries and don’t waste your time on utilities alone.
• Invest in market leader wherever you find them if they are overpriced. Market leaders are companies that dominate their corner of the industry and the ones you are looking for are so entrenched it will be hard to dislodge them. Microsoft is the obvious example of a market leader. I’m not suggesting investing in Microsoft, that’s your decision, but they are in no danger of losing their position of market dominance. Of course, you would have said the same thing about GM 10 or 15 years ago.

Conclusion

The point is that you should find an investing strategy that works for you. If it is complicated and data heavy or simple and more intuitive, make it yours and don’t be bullied into adopting another’s strategy.