Investors often search for an investing strategy they hope will beat the market. Whether using the stock market, index funds or other mutual funds, they look to Wall Street for inspiration on buying and selling. Active trading can sometimes take advantage of favorable stock prices to beat the market in the short term by selling stocks for quick profits, but this can be misleading. Consistent, successful trading strategies often prove elusive in the long term.
Often the most predictable trading strategy can be a “buy it right” approach similar to that used by those who’ve found riches by investing in real estate, buying property on the cheap, and collecting rent until the market got hot.
Camarda believes investment success is founded on some key principles:
- Diversify widely. Don’t concentrate your wealth in too few securities, because if they go bad you lose too much.
- Diversify in different kinds of markets – like US and non-US stocks – to spread risk even more. Mutual funds and ETFs are great for this.
- Use a Warren Buffett, value approach. Look to buy quality investments at fair to cheap prices. Don’t overpay for “hot” or “flyer” stocks. It takes grit and patience to be a value investor, when the go-go stocks are going crazy and your golf buddies brag about how much they think they’ve made (of course, no one talk about their losers!) But over the long term, the value method’s results could have yielded twice as much wealth as using growth stocks. It can be boring, but very profitable!
- Finally, focus on how your entire portfolio is doing, and don’t get depressed by the inevitable laggards. Keep an eye on the companies to make sure they are doing OK, but don’t dwell on the stock prices. Good things take time.