The 5 most common stock market investment strategies:
In this thread, I will cover the 5 most common stock market investment strategies, the challenges of each strategy, and which types of investors would be better suited towards a particular strategy.
1/ Passive Investing
Passive investing is a strategy that many investors follow especially when it comes to their retirement accounts.
This strategy consists of buying etfs or index funds and holding them for a long time.
Typically, people dollar-cost average into these
Passive investing is a strategy that many investors follow especially when it comes to their retirement accounts.
This strategy consists of buying etfs or index funds and holding them for a long time.
Typically, people dollar-cost average into these
1A/ In the past, if you were a passive investor you would go to a financial advisor, and they would invest your money into a mutual fund. They would charge a big fee.
However, 1 out of 20 mutual funds underperform the broader market.
However, 1 out of 20 mutual funds underperform the broader market.
1B/ Therefore, the best way to approach passive investing is just choosing an etf that tracks the broader market.
You want an etf that tracks either the S&P 500 or the NASDAQ 100.
My favorites are: $VOO, $SPY, $IVV, or $QQQ
You want an etf that tracks either the S&P 500 or the NASDAQ 100.
My favorites are: $VOO, $SPY, $IVV, or $QQQ
1C/ Passive Investing Struggles
Even though passive investing is handsoff, here are a few things that you should think about.
-Scheduling your weekly, monthly investments
-Rebalancing your portfolio
-Determine how to sell in a tax efficient manner
-Lack of concentration
Even though passive investing is handsoff, here are a few things that you should think about.
-Scheduling your weekly, monthly investments
-Rebalancing your portfolio
-Determine how to sell in a tax efficient manner
-Lack of concentration
2/ Dividend Investing
Dividend investing is a strategy that focuses on producing cash flow for the investor.
When a company has profits, they can choose to pay their shareholders the profits in the form of dividends.
These companies are usually larger and older
Dividend investing is a strategy that focuses on producing cash flow for the investor.
When a company has profits, they can choose to pay their shareholders the profits in the form of dividends.
These companies are usually larger and older
2A/ Companies do not have to payout or grow their dividends. They can cut their dividend whenever they choose.
The best dividend stocks will continue to grow and payout dividends as their income continues to grow.
The best dividend stocks will continue to grow and payout dividends as their income continues to grow.
2B/ In my opinion, dividend stocks are best when you have a large amount of money to invest in them.
You need enough capital to make your monthly cash flow worth it.
Some of my favorite dividend stocks are: $mo, $o, $appl, $abbv, $ko, @sbux, and $msft
You need enough capital to make your monthly cash flow worth it.
Some of my favorite dividend stocks are: $mo, $o, $appl, $abbv, $ko, @sbux, and $msft
2C/ Dividend Investing Struggles
Investing in dividends can be hard at times. Here are a few things to think about:
-Finding attractive dividend stocks
-Experiencing a dividend cut
-Not getting capital gains from dividend stocks
Investing in dividends can be hard at times. Here are a few things to think about:
-Finding attractive dividend stocks
-Experiencing a dividend cut
-Not getting capital gains from dividend stocks
3/ Individual Stock Picking
A stock picker focuses on picking individual stocks, mostly growth stocks, and hoping that they will increase in price over time for a profit.
When you do this, you are hoping that the stocks you pick will beat the broader market index funds.
A stock picker focuses on picking individual stocks, mostly growth stocks, and hoping that they will increase in price over time for a profit.
When you do this, you are hoping that the stocks you pick will beat the broader market index funds.
3A/ Fundamental analysis is primarily used with this strategy
This involves reading and interpreting important financial documents and using valuation methods to determine an intrinsic value of a stock.
I personally use discounted cash flow as my valuation method
This involves reading and interpreting important financial documents and using valuation methods to determine an intrinsic value of a stock.
I personally use discounted cash flow as my valuation method
3B/ In my opinion, you should only pick a handful of stocks when using this method and stay concentrated.
It is very hard to pick multiple undervalued stocks.
$hims is my favorite undervalued stock at this time.
It is very hard to pick multiple undervalued stocks.
$hims is my favorite undervalued stock at this time.
3C/ Stock picking struggles
Picking individual stocks and beating the broad market is one of the hardest things to do.
You have to remember that if you are not consistently beating the S&P 500 then you are wasting your time.
Picking individual stocks and beating the broad market is one of the hardest things to do.
You have to remember that if you are not consistently beating the S&P 500 then you are wasting your time.
4/ Active Trader and Day Trader
Traders trade in and out of stocks and make $ on price movements.
This strategy comes with a lot of technical analysis, which includes charts and price action.
Market sentiment and general emotion play a huge part in this style.
Traders trade in and out of stocks and make $ on price movements.
This strategy comes with a lot of technical analysis, which includes charts and price action.
Market sentiment and general emotion play a huge part in this style.
4A/ While most investors may hold stocks for months or years, a trader is looking to hold a stock between seconds to a few days.
Traders are not reading earnings reports or financial statements. They are focused on candlesticks, patterns, and price/volume movements.
Traders are not reading earnings reports or financial statements. They are focused on candlesticks, patterns, and price/volume movements.
4B/ Traders look for certain indicators that will allow them to capitalize on these movements.
My favorite indicators are:
-MACD
-RSI
-Moving Averages
-Fibonacci Levels
-Bollinger Bands
My favorite indicators are:
-MACD
-RSI
-Moving Averages
-Fibonacci Levels
-Bollinger Bands
4C/ Trader Struggles
Only 1% of traders are successful. This means that if you had 100 traders in a room, only 1 of them would actually make money on a regular basis.
When you trade, you have to be 100% emotionless which is the hardest part of trading.
Only 1% of traders are successful. This means that if you had 100 traders in a room, only 1 of them would actually make money on a regular basis.
When you trade, you have to be 100% emotionless which is the hardest part of trading.
Thank you for reading!
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