Invest in Growth and Value
Listen up! If you want to make real money in the stock market then you have to use a strategy that really works. You can't just read a magazine article and throw money at the stock market. You have to be smarter than that and you have to play the game right.
The two main strategies that money making investors make are based on either growth or value tactics. Investors either look for companies that are growing earnings or that have stocks that are priced cheap that they expect will go up in value. Some combine both strategies.
The growth investors buy in stocks that go up and go up more. What makes the stocks keep going up is the fact that the companies they represent have big earnings growth. The companies got new products or are run better than their competitors and build market share, which translates into a rising stock price.
Growth stocks usually do better than other stocks in bull markets, but can fall hard in a bear market. There are some dangers to growth investing. If all of a sudden the growth in the earnings stops the stocks can fall very hard, because investors are all betting on the big earnings growth to keep going on.
The problem with growth companies is that at some point the growth slows down. Usually this happens right as the excitement surrounding the company is at a crescendo. The stock then usually falters and goes nowhere despite the continued good news. What is happening is that company insiders know that the future is not going to be as easy as the climb up to ascendancy and start to sell out ahead of the crowd, thereby putting a lid on any future price advances.
Because growth stocks tend to be highly valued they are susceptible to large and sudden drops on any negative news. An earnings warning or statements from a CEO that earnings are going to grow at a slower pace are enough to crush investors. Strategies based on growth stock investing do not tell investors to sell until it is too late.
The other way that is popular to invest in the stock market is called value investing. Think about Warren Buffett right here. Buffett likes to buy stocks that he thinks are at a cheap price and doesn't buy when the stocks go up. He buys when they are down, by buying stocks he thinks others are selling at a low price for a mistake.
In a bear market or a big stock market correction you can find bargains and that is when it is time to think about being a Warren Buffett. It happens all of the time. Investors always get scared from time to time and sell stocks at a stupid price. That is when you can buy.
Sometimes a value investor has to wait a long time after buying a stock to see it go up, because the public stays scared and doesn't see the value in the stock. This can even happen in whole markets. Gold and commodities stayed at low prices until only a few years ago for example.
Value investing methods also tend to underperform strategies based on growth during bull markets and can cause investors to sit out on the best moving stocks. For instance Warren Buffet refused to invest in technology stocks during the 1990's, because they did not meet his valuation criteria. - 23208
The two main strategies that money making investors make are based on either growth or value tactics. Investors either look for companies that are growing earnings or that have stocks that are priced cheap that they expect will go up in value. Some combine both strategies.
The growth investors buy in stocks that go up and go up more. What makes the stocks keep going up is the fact that the companies they represent have big earnings growth. The companies got new products or are run better than their competitors and build market share, which translates into a rising stock price.
Growth stocks usually do better than other stocks in bull markets, but can fall hard in a bear market. There are some dangers to growth investing. If all of a sudden the growth in the earnings stops the stocks can fall very hard, because investors are all betting on the big earnings growth to keep going on.
The problem with growth companies is that at some point the growth slows down. Usually this happens right as the excitement surrounding the company is at a crescendo. The stock then usually falters and goes nowhere despite the continued good news. What is happening is that company insiders know that the future is not going to be as easy as the climb up to ascendancy and start to sell out ahead of the crowd, thereby putting a lid on any future price advances.
Because growth stocks tend to be highly valued they are susceptible to large and sudden drops on any negative news. An earnings warning or statements from a CEO that earnings are going to grow at a slower pace are enough to crush investors. Strategies based on growth stock investing do not tell investors to sell until it is too late.
The other way that is popular to invest in the stock market is called value investing. Think about Warren Buffett right here. Buffett likes to buy stocks that he thinks are at a cheap price and doesn't buy when the stocks go up. He buys when they are down, by buying stocks he thinks others are selling at a low price for a mistake.
In a bear market or a big stock market correction you can find bargains and that is when it is time to think about being a Warren Buffett. It happens all of the time. Investors always get scared from time to time and sell stocks at a stupid price. That is when you can buy.
Sometimes a value investor has to wait a long time after buying a stock to see it go up, because the public stays scared and doesn't see the value in the stock. This can even happen in whole markets. Gold and commodities stayed at low prices until only a few years ago for example.
Value investing methods also tend to underperform strategies based on growth during bull markets and can cause investors to sit out on the best moving stocks. For instance Warren Buffet refused to invest in technology stocks during the 1990's, because they did not meet his valuation criteria. - 23208
posted by X - Men @ 1:51 AM
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