My Investment Strategy: Looking at My Philosophy & Activity
Investment Strategies, My Strategy & Philosophy, and Weekly Activity.
What is an Investment Strategy?
Nothing grinds my gears more than an investor criticizing another fellow investors investment strategy. It’s simply an irrational motive to act on when you have no understanding of what that individuals personal circumstances are, financial plans and goals, time-horizon, income, lifestyle, risk tolerance, etc. Every single investor is going to have a unique strategy that’s tailored to them, by inspecting many of these variables listed above. ONLY then, are you able to fully understand and determine what strategy works best for yourself or another investor. So, let’s put that to rest…
Your investment strategy essentially refers to a set of variables. When these variables are examined thoroughly, it will more than likely lead you to 5 primary long-term investing strategies (because we are long-term investors here).
Here is a quick illustration depicting these strategies:
There are other strategies outside of these primary 5. Ex: Contrarian Investing & Income Investing, which are two additional strategies not listed. However, these tend to be the most popular for long-term investors.
Dollar-Cost Averaging (DCA) - This involves investing the same amount of capital into a quality stock or fund, at regular intervals over a certain period of time, regardless of price. By using this strategy, investors are able to lower their average cost-basis and make volatility a non-event.
Growth Investing - This is a stock-buying strategy where investors will look for businesses that are expected to grow at an above-average rate compared to their industry sector or the broader market. Typically, these are companies that fall into the small-cap or mid-cap (market capitalization) category but come with a much higher risk.
Index Investing - Indexing principally follows a “buy-and-hold” approach to replicate the performance of a specific index. These investors will purchase Exchange-Traded Funds (ETFs), Index Funds, or even a fixed-income index, attempting to match the risk and return of the overall market. This strategy eliminates the stress of stock-picking, and maintenance required to hold individual stocks.
Value Investing - This is an investment strategy that involves picking quality stocks that are trading for less than their intrinsic or book value. This strategy has been practiced by some of the greatest investors of our time, the likes of Warren Buffett, Charlie Munger, & Benjamin Graham (The Intelligent Investor) to name a few.
Dividend Growth Investing - This involves buying shares in companies that have a strong history of paying consistent and increasing dividends while emphasizing capital appreciation; also, investors incorporate a business’ Dividend Growth Rate (DGR) to get an understanding of how sustainable & healthy the company’s dividend truly is. An added component to this, is investors will use the Dividend Reinvestment Program (DRIP), which reinvests all dividend payments directly back into the business, ultimately buying more shares. The primary goal with this is to compound portfolio growth.
Dividend Growth Rate (DGR) is a metric used to show how much a company’s dividend has grown over a period of time. As a company grows, it may increase the dividend paid to investors, which may indicate stability and healthy growth.
This is calculated with this formula below:
Dividend growth rate = [Current annual dividend / previous year’s annual dividend] - 1
My Investment Strategy & Philosophy
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