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Neil Strauss was a balding, awkward, skinny dude who couldn’t get a date. A loser, if you will.
But he transformed into a confident, totally bald (and proud of it), stylish man who had women throwing themselves at him.
He made this transformation by learning the strategies taught by the PUA (Pick Up Artist) community. In fact, Strauss learned these strategies so thoroughly that he became the top PUA in the world (which he documents in his amazing book The Game).
Now married, he has taken those strategies and what he learned about human behavior and has dedicated his life to helping men and women improve their health, love life, finances and overall mental health.
All happened thanks to taking the time to learn and apply some basic strategies about human behavior years ago.
Such is the importance of having a strategy. If he hadn’t learned them, he’d likely still be winging it through life, awkward and single.
Having a sound strategy is important in many aspects of life on this Rock we live on. And investing is no exception. So in this article, we’re gonna look at the main investing strategies out there so you can get a sense of which one is right for you.
Now a couple o’ things before we dig in.
First, we’re talking about investing in stocks (and a little about bonds) here. We’re gonna leave real estate, art, comic books, 1970s Star Wars action figures, llama farms and the like outta the mix.
Second, there is no 100% “best” strategy for investing in stocks. The best strategy for you is the one (or more) you can stick to. It’ll depend on things like:
We’ve got a fairly long (though not entirely complete) list of investing strategies below. And there is overlap between the strategies.
For example, you can be a Buy and Hold investor that does Index Investing. So feel free to mix and match to suit your style. The important thing is to just have an overall strategy in mind before you start tossing your hard earned dough into the market. Otherwise you’d might as well just take that money to the casino.
Also, you can totally change/evolve your investing strategy over time. Or, if you have a big enough portfolio, use different strategies at the same time in your different investing accounts.
Okay, with all that said, on to the strategies…
Buy and hold is an excellent choice for the lazy, those who don’t wanna put much time into investing and/or those with a long investing time horizon.
Oh, and it also happens to be the strategy that produces the best returns for many investors.
It works basically like a gym membership… you buy it and forget it.
With buy and hold, you invest in some stocks, ETFs or mutual funds and then leave them be. Doesn’t matter whether the market’s going up or down. You just do nothing. That’s all there is to it.
This strategy works well when combined with Index Investing (see below) and Dollar Cost Average (also see below).
Active trading is NOT for the lazy. Active trading involves, well, actively trading stocks, ETFs, etc. on a shorter term basis.
Two main active trading strategies are:
Day trading where you hold stocks for a few minutes or hours.
Swing trading where you hold stocks from a few days up to a few months.
These trading strategies involve reading charts to try to predict price swings in stocks that can be bought/sold for relatively quick profits.
It’s time intensive. You have to do your homework and learn how to read stock charts like a boss.
There are people who make a good living using these strategies (though not nearly as many as day/swing trading course ads and social media posts would have you believe). But you have to know what you’re doing. This strategy is not for newbies or those who ain’t so comfortable with a lotta risk.
Ever hear of Warren Buffett? The guy who’s generally considered the GOAT in the investing world? He’s a value investor.
If my mom were an investor, she’d be a value investor. Cuz value investing is all about finding stocks to buy at bargain basement prices. You’re basically always looking for a good deal.
This strategy is great for those who have some time on their hands and get excited about digging through financial statements. You’re essentially on the hunt for companies who stock prices you think are seriously undervalued and don’t reflect what the company is really worth.
Growth investing involves putting your cash into companies you think have a great opportunity for, wait for it, growth.
Growth investing is generally considered riskier than value investing. It typically involves investing in smaller companies in industries you think are about to take off and/or companies you think are poised to dominate their markets. Think of “sexy” companies like Tesla, Amazon, Shopify and Beyond Meat.
This is the only one on this list that doesn’t mainly involve investing in stocks. With income investing, you’re looking to put your moolah into investments that kick out cash payments on a regular basis. It’s a way to generate a reliable income stream with fairly low risk.
Bonds are a big part of the income investing strategy. As are stocks that pay out regular dividends.
This is one of the riskier strategies on this list. With small cap investing you’re on the hunt for small companies. Hidden gems, if you will, that have been overlooked by most investors.
These small companies can produce huge returns if you find some good ones. But they are highly volatile and you can lose your shirt on them if you don’t know what you’re doing. This is a strategy for those more experienced in stock investing. And those who want to take the time to hunt for the potential hidden gems that can deliver big returns.
Do you give a shyt about the planet and the people on it? Want to support companies that do good in the world while making some nice returns for your portfolio?
Then give socially responsible investing a try. This is where you put your money into companies that are environmentally and/or socially friendly. As with pretty much every other strategy on this list, you can get in on this strategy either by picking individual companies to your portfolio or choose a socially responsible mutual fund or ETF.
This is where you put a set amount of money into the market at regular intervals. Doesn’t matter what the market is doing.
Many 401k plans involve dollar cost averaging. In a 401k, you pick a mutual fund (or basket of mutual funds) and your money gets invested in them each month like clockwork.
This strategy helps take emotions out of investing decisions. It also evens out short term volatility in the stock market. (Cuz you automatically will buy more shares of a fund when prices are lower and fewer when prices are higher.)
This is a great strategy for newbies and the lazy (since you can set the regular investments to happen automatically). It also is a good strategy to combine with Index investing.
This is the teenager of investing strategies. It’s basically where you the opposite of what everyone else is doing.
If people are high on stocks, contrarians are looking to sell. If people are down in the dumps about stocks, then contrarians are looking to buy.
This is similar to Value investing and, in fact, Warren Buffet is considered a contrarian investor. In fact, one of his most notable quotes sums up contrarian investing perfectly…
“Be fearful when others are greedy and greedy when others are fearful.”
Last on our list here is Index investing. This is where you buy a portfolio of low cost ETFs or Index funds. The goal of index investing is to match the overall performance of one, or a few, market indexes and call it a day.
Index investing involves minimal cost. Tends to be a buy and hold strategy. May involve dollar cost averaging. And, most importantly, research has shown that this strategy will outperform actively managing a portfolio of stocks over time (even those managed by high priced money managers).
Of all the investing strategies listed here, this is the easiest to pull off for most investors and will provide the best returns over the long haul.