An investment strategy is a set of principles that guide investment decisions. There are several different investment plans you can follow depending on your risk tolerance, investing style, long-term financial goals, and access to capital, Investing strategies are flexible.

Strategy 1: Value Investing

Value investors are bargain shoppers. They seek stocks they believe are undervalued. They look for stocks with prices they believe don’t fully reflect the intrinsic value of the security.

Value investing is predicated, in part, on the idea that some degree of irrationality exists in the market. This irrationality, in theory, presents opportunities to get a stock at a discounted price and make money from it.

Strategy 2: Growth Investing

Rather than look for low-cost deals, growth investors want investments that offer strong upside potential when it comes to the future earnings of stocks. It could be said that a growth investor is often looking for the “next big thing.”

Growth investing, however, is not a reckless embrace of speculative investing. Rather, it involves evaluating a stock’s current health as well as its potential to grow.

Strategy 3: Momentum Investing

Momentum investors ride the wave. They believe winners keep winning and losers keep losing. They look to buy stocks experiencing an uptrend. Because they believe losers continue to drop, they may choose to short-sell those securities.

Momentum investors are heavily reliant on technical analysts. They use a strictly data-driven approach to trading and look for patterns at stock prices to guide their purchasing decisions. This adds additional weight to how security has been trading in the short term.

Strategy 4: Dollar-Cost Averaging

Dollar-cost averaging (DCA) is the practice of making regular investments in the market over time and is not mutually exclusive to the other methods described above. Rather, it is a means of executing whatever strategy you chose. With DCA, you may choose to put $300 in an investment account every month.

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