Stock Investment Strategies

There are two basic approaches to making stock investment decisions, and one of them might be whispering that a change in stock investment strategies is in order for 2014 and 2015. There are also two different factors to consider any time you make a stock investment. Since strategies will differ depending on how much risk you are willing to take, let’s take a look at your choices and the risks involved.

In my opinion stock investment strategies determine the investor’s success over the long term and the two approaches to consider are the fundamental and the technical approach. The first analyzes prospects for the economy and corporate America: interest rates & inflation, unemployment, future growth in corporate sales & profits etc. The technical approach analyzes past price movements in the market and in specific stocks or sectors in it. What does each suggest in terms of stock investment strategies for 2014, 2015 and beyond?

FUNDAMENTALLY things look luke-warm and inconclusive, but TECHNICALLY the stock market looks like its due for a correction. That’s my simple conclusion, and I like to consider both approaches. What I feel in my gut is that the technical data is most telling, and it is whispering to me to be careful in 2014 and beyond. We could be in for another repeat performance. If this is the case, aggressive stock investment strategies like chasing the market are too risky for my money.

In the year 2000, a bear (down) market began that clipped investors for over 50% in less than two years. Seven years later in 2007, another bear took hold that nailed investors with 50% losses (or more) in less than two years. It’s now seven years later again, and at the beginning of 2014 stocks were at all-time highs and up over 150% since the previous bear market lows. Stock investment strategies that ignore these numbers could be an invitation to join in on a repeat performance.

Making investment choices is not rocket science, but here are some simple numbers that have worked against investors for over a dozen years. If you lose 50% in your investment portfolio, you’ve then got to make 100% just to break even. The simplest of all stock investment strategies is to simply hold on and hope for the best in 2014 and 2015. But this could be more risk than you want to take.

I mentioned two factors you need to consider before investing in stocks, and these are timing and selection. Timing is the primary issue today. Would you rather lighten up on stocks a bit early and perhaps lose out on further potential profits, or hang on and give back a major part of your profits if the market tanks? Relying on your section skills for picking stocks in a bad market is usually wishful thinking and one of the weaker stock investments strategies for average investors.

There is never a guarantee that history will repeat itself, but stock investment strategies carry no warranty either. Hanging on or being fully invested carries a significant downside risk in 2014 and 2015. Sometimes the best stock investment strategies involve cutting your risk and taking money off the table… awaiting future opportunities when stock prices look cheap. At that point timing can be simplified by easing back in over time. And if you diversify (like in a diversified stock fund) you won’t need to be concerned with stock selection.