Developing an investing and trading strategy that works FOR YOU

January 2, 2018

Now that we understand how the stock market works, what makes a good stock, and what you'll need to get started's time to get down to business and develop a strategy for yourself.

To keep things simple, we're going to break things down into two categories:  Long-term investing and short-term trading.

Long-term investing, for our purposes, means buying stocks with the intention of holding onto them for at least one year.  This is the approach of truly becoming an owner in a company that you expect will perform well (and more importantly, better than is expected by most) over the long term.  The LikeFolio Tactical Model takes this approach, looking for 8-18 stocks at a time that we can own in anticipation of the company having strong performance over the next 1-3 years based on our analysis of consumer adoption.

Long-term investors in Amazon stock have been rewarded with exceptional gains and a feeling of ownership in one of history's greatest companies.

Short-term trading means taking positions on stocks or options to profit from price movements over a period of time ranging from 1 day to several months.  Unlike long-term investing, this style doesn't really give you the feeling of ownership in the company.  Short-term trading is more similar to gambling, in that you are essentially betting on the price movement of the company over a short period of time.  Likefolio Opportunity Alerts are designed for short-term trading, as is the Likefolio Earnings System, which uses social-data analysis of consumer behavior to predict the revenue and earnings announcements of companies on a regular basis.  

Short-term traders following LikeFolio's data were able to almost double their money in a matter of months as Express stock jumped on "better than expected" earnings reports.

Strategy consideration:  Income or Appreciation?

One of the key things you need to determine is what your financial goal is for your investing/trading.  Are you in it to produce extra money that you can withdraw from your brokerage account?  Or are you trying to build a portfolio of stock ownership that appreciates in value over time as a method of saving (for retirement or other goals)?  

Strategy consideration:  Having fun & learning

This is one you won't see in many economics books or investing guides.  But we at LikeFolio are firm believers that investing and trading should be fun!  Long-term investing should connect you to companies that you are part owner in, educate yourself on their business, and support their mission.  Likewise, short-term trading should provide a competitive outlet, where you are risking money to try to profit from moves that others didn't see coming.... because you were better at your research.

Which one of these best suits you?

Honestly, only you can decide that.  For most of us, it's a mix.  Building a long-term portfolio of companies that we own is interesting and rewarding, while it's difficult to beat the thrill associated with completely nailing an earnings trade and seeing your money triple on an options position. 

Whichever mix of strategy is right for you, own it.  Learn it.  Equip yourself to succeed at it.  Because if your strategy matches your personality, you're already on your way to investing success -- no matter how you define it.

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LikeFolio analyzes social media data to accurately predict shifts in consumer behavior. We sell data and insights to professional investors, corporate research teams, and software providers.
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