IFB15: What Other Investing Strategies Are Out There?

There are so many investing strategies out there it is hard to know which one is best for you. In today’s session, we will discuss some of the major investing strategies such as value investing, trend following, and momentum investing. All investing strategies have pros and cons to them and it is important to understand how these investing strategies work. Investing can be complicated enough, it is probably best to find a style that suits you and your personality so you can be successful.

* A breakdown of trend following and momentum investing
* Why buy dividends and why we aren’t missing out on non-dividend paying stocks
* How valuations make a difference
* The ins and outs of shorting a stock
* The best use for value investing strategies

 
Welcome to session 15. Today we are going to be talking to Allan, who is from upstate New York and he has only been investing for a couple of weeks but he asks us some great questions. I can’t believe the quality of the questions being asked by the listeners of this show. It gives me hope that we are providing some value to everyone out there. In today’s session we will learn:
 
How does value investing compare to the other investing strategies, what are the pros and cons of each?
Andrew: Yeah, that’s a great question. I don’t know if I mentioned this or not before, but when I got started in the world of investing. I had been exposed to a certain type of value investing, Peter Lynch was the first book I read, and it is more of a general value investing, and he doesn’t get into the nitty gritty of it. Just the basic of the vibe of selling high and buy low general advice you would get from a lot of books. Peter Lynch has some approaches that take it a step further.
But that was the kind of the general thing that I got into it. I got into the Intelligent Investor written by Benjamin Graham, and that was what exposed me to value investing. Even though firstly I feel like a strategy should make sense intuitively, either the logic is there or it isn’t’. I apply that to a lot of different things. I feel like if you are an intuitive, intelligent person you can base your experiences, you can kind of use some of the out of the box thinking, and make a little bit of a thought experiment and what is being presented to you is legitimate.
I felt value investing right away was for me, but I also am the type of person that wants to collect data on whatever options are available, see if I am going to label myself as a value investor what are my competitors doing so I can understand where I can get an edge. And on top of that maybe pull things that other guys are successful with and implement that into my strategy.
One of those big things that both Dave and I love to preach is the trailing stop, and it’s not something that is talked about a lot of value investing, and it’s a technique we borrow from technical analysis, more specifically trend following.
Trend following is a strategy that is based on instead of company financials it looks at a companies stock price. And it’s movement of the stock price and from there develops a system to try to maximize a profit gain on that stock price as it rises as there’s optimism and as the bulls are cheering up the stock as may be a craze happens and everybody just jumps in. What can happen with a strategy like that is naturally they can get in a lot of positions where a company is doing well. And that’s why the stock price is going up and that’s why a strategy like a trend following can attribute a lot of success to the same reasons like a strategy like value investing is attributing its success, which is really down the business fundamentals.