Investment Strategy

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Some investment strategies seek rapid growth where an investor focuses on capital appreciation, or they can follow a low-risk strategy where the focus is on wealth protection. Many investors buy low-cost, diversified index funds, use dollar-cost averaging and reinvest dividends. Dollar-cost averaging is an investment strategy where a fixed dollar amount of stocks or a particular investment are acquired on a regular schedule regardless of the cost or share price. The investor purchases more shares when prices are low and fewer shares when prices are high. Over time, some investments will do better than others, and the return averages out over time.

Graham's Five Strategies

In 1949, Benjamin Graham identified five strategies for common stock investing in "The Intelligent Investor."

1.  General trading. The investor predicts and participates in the moves of the market similar to dollar-cost averaging.
2.  Selective trading. The investor picks stocks that they expect will do well in the market over the short term; a year, for example.
3.  Buying cheap and selling dear. The investor enters the market when prices low and sells stock when the prices are high.
4.  Long-pull selection. The investor selects stocks that they expect with grow quicker than other sticks over a period of years.
5.  Bargain purchases. The investor selects stocks that are priced below their true value as measured by some techniques.

Graham emphasized that every investor must decide how they want to manage their portfolio. Experienced investors may prefer and be comfortable with a buy low and sell high strategy, whereas investors who have less time to research and follow the market might benefit more from investing in funds that track the market and adopt a long-term view.