Here highlights the most effective strategies to adopt when investing in the stock market. Start with the easiest, lowest effort and lowest risk methods and end with high effort and higher risk strategies.
1. Invest in an ETF for the long-term (10-20 years) (low risk, low effort). The fact is the easiest way to make money in stocks is to invest in a broad market passive index-tracking fund. Investing in a passive ETF is easy, you do not need to select stocks, your investment is diversified and they have low management fees.
2. Invest in value stocks long-term (low risk, medium effort). Two most important criteria created by the great Benjamin Graham, Fair Value (Intrinsic Value) and Margin of Safety. Stock Screener needs to filter on investing criteria such as earning per share (EPS) growth, consistent return on equity (ROE), high return on invested capital (ROCE) and low debt using the solvency ratio. The screener needs to calculate the margin of safety using discounted cash flow (DCF). If the cash flow value is 30% higher than the company’s stock market valuation the it has a good margin of safety and it is a candidate for purchase.
3. Invest in growth stocks (medium risk, medium effort). CANSLIM is the most outstanding growth stock in investing strategies. It was designed by William J. O’Neil to produce market-beating profit performance. Using the CANSLIM criteria in investing should mean profitable returns. Current Earnings, Annual Earning, New Products, Supply, Leaders, Institutional Sponsorship and Market Direction are vital criteria.
4. Invest for income/dividends (low risk, medium effort). This essentially means investing in companies that have a long history of continually paying and increasing dividends.
5. Trading stocks (high risk, high effort). Learning stock trading and investing takes a lot of work. There are no short-cuts, but you can teach yourself by learning from the wealth of books, videos, podcasts and training courses available. You must treat you are investing seriously and not take undue risks with your capital; there are no get-rich-quick schemes.