Narach Investment

STOCK MARKET INVESTMENT STRATEGIES


The stock market investment strategies are relevant to investors who are in it for the long haul. There are basically two strategies that an investor can apply; the first one being to "buy low and sell high" and the second one being to "buy high and sell higher".

We would get to these strategies shortly. However, investors are well advised to realize that the other strategies of "selling high first and then buying back low at a later date" cannot reasonably be applied while investing in stocks as we would have to borrow the stock before we can sell it at higher levels, and then we have to consider the interest cost and dividends payable to the original owner of the stock. To apply such strategies would require the investor to route investment positions through the futures and options markets. And the investor must realize that the futures and options markets have their own set of rules and factors to consider. For a better understanding of futures and options, we would suggest that the investor read a suitable book on options, futures and other derivatives

Now to get back to stock investments and stock markets, we can safely state that in the long term stock prices would keep going up. Ideally an investor would buy into an up-company, in an up-industry, operating in an up-economy. Further, holding these stocks for long periods of time to take full advantage of the growth phase of the company.

1. The aspects to be considered with respect to the company would be that it is:

2. To ensure a margin of safety and a reduction of risk, the investor would be well advised to diversify.

3. Do not sell these stocks, except in certain specified conditions.

4. The investor is expected to make money by capitalizing on the underlying growth of a fast growth company.

5. The investor is expected to bank on the climate and not on the weather.

6. The advantages of this strategy are:

7. An investor would on occasion have reason to sell stocks held in his portfolio. When to sell would be governed by the following:

8. A investor would have an occasion have reason not to sell stocks held in his portfolio. When not to sell would be governed by the following:

9. The initial selection of the stock is critical. To reiterate the selection criteria for companies to be held in our portfolio are:

10. The investor would ideally diversify his portfolio by investing in stocks of 10 companies spread over the lead industries of the economy.

11. The investor would also diversify over time. That is he would take his time to invest his money and spread his purchases of the selected stocks from the present to a point of time in the future. This would also help in averaging the purchase price and help bring about an additional margin of safety.

12. The investor would be able to give time to his investments to produce results.

13. Do not get upset over and by short term market fluctuations. Bank on the trends and don't worry about the tremors. The investor must keep his mind on the long term cycle and ignore the sporadic ups and downs in daily price movement.