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5 Strategies for investing

Fernando J. Saballos, Contributor

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  • Buy Low, Sell High

This classic investment expression has been passed down from generations of successful investors. While it’s the ultimate motto to follow, sometimes novice investors have a difficult time understanding when stock is truly at either a low or a high. Brokerage accounts have platforms that clear up this complexity. The 52-week ranges are available virtually everywhere and are useful in determining how stock has performed within the year. By tracing its high and low points, you can do further research as to how and why it was at that level. Beyond that, the platforms often track up to five years of performance. However, performance patterns should be viewed with a grain of salt. The real value of a company comes from knowing why it performed at specific levels. Learning a company’s overall expectations is important to understanding why it performed a certain way. You don’t want to buy shares of a company that is trading low, not realizing the fact that it might be near its demise. To put it into context: Would you have bought a cheap Blockbuster stock once you and all your buddies started streaming from Netflix?

  • Rule of Thumb: Buy at 10, Sell at 20

This layers rule No. 1 by solidifying a 100-percent, or double-your-initial-investment return, if, of course, the stock performs to this level. It also reduces the psychological stress of investing by giving you an exit strategy, instead of just aimlessly watching it go up and down. Maybe your stock trended up at an astronomical pace, or maybe it took an eternity to get here; but once that $10 becomes $20, the conservative approach is to take the 100-percent gain.

  • Sell Half Your Shares When at 100-Percent Gain

By electing to follow this strategy, you will break even on your original investment. This way, you can keep your skin in the game and watch those remaining shares continue to grow. When it reaches 100 percent of that first sell price, repeat the formula. When that 10 becomes a 20, sell half. When that 20 becomes a 40, sell half. Repeat endlessly.

  • Buy in Bulk

The commission structure for placing trades has drastically changed. Brokers no longer charge on the percentage of the purchasing price. Instead, there is a flat fee per-trade. This reduction in fees has favored investors by resulting in an overall increase in net profits, or the amount that is actually received after fees. With this comes the other side of the sword: If you constantly trade without consideration, commissions can still eat away at your profits. Buying in bulk is advisable if you’ve set aside a certain amount for a certain company. Of course, if the price changes drastically over the course of months or years, and you see an opportunity, then, by all means, purchase again. Keep in mind the cost of commission. Most accounts list the cost basis, or the cost per-share after fees, and it will guide you to what the actual 100-percent gain will be.

  • Invest in a Company you Believe in

Belief is a subjective term. It can mean a company that you morally support, based on services; a company that has proven successful; or a company that meets your investing goals, such as dividends. Whatever your psyche, don’t go into a company blindly. Making uninformed investment choices is gambling. By doing research and understanding what you’re investing in, you are making an informed decision. You might also be less confused whenever your stock is performing sporadically. Transparency is key, and the availability of information should not to be taken for granted. Remember, your success is now interdependent with the company’s success. Tracking the performance of your stock on a daily basis might not produce much for you, but tracking the performance of the company, by being involved, by having part ownership, should be utilized.

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5 Strategies for investing