Strategies to Make Money in The Stock Market

One great way to grow your money is to invest into the stock market. But deciding how to invest into it can be a bit tricky. Everyone is different, but there are 5 strategies that all traders use to make money in the market.

1. Buying and Holding for the Long Term

Everybody knows what buy and hold is. In fact the vast majority of market participants buy stocks and hold onto them for the long term. And it does make sense, stocks do go up over the long term, so buying and holding can be a passive way to grow your money.

2. Trading The Trend

One other strategy is called trend trading. It involves buying stocks that are going up and selling stocks that are not going up. While it might sound like it was invented by a 5 year old it really can work if you get the hang of it. Sometime the simplest answer is the best.

3. Swing Trade

Swing traders use technical indicators to buy and sell stocks in the short term in order to make profit when all is said and done. Any trade that takes over 1 day and has a profit target as well as a stop loss can be considered to be a swing trade.

4. Options

Stock options give investors a way to leverage their money and to make huge returns from the stock market. There is only one problem; they can also give traders huge losses. For that reason it is best to only consider options after you are already profitable trading stocks.

5. Day Trading Stocks

Day trading is exactly what the name suggests. You buy and sell stock within one day in order to make money on the small moves that occur throughout the day. Day traders are not always profitable, but over the long term it can be a great way to make money.

Every strategy has its ups and downs. But it is up to the individual trader to determine which one fits them the best. Learning the basics of each and experimenting with them can help you determine how you want to approach the market.

http://www.freefinancialtoday.com/2010/03/20/strategies-to-make-money-in-the-stock-market/

Buffett's Biggest Mistake (Swing the Bat)

Buffett's Biggest Mistake
By Rich Greifner April 6, 2009 Comments (5)


It doesn't happen often, but it does happen. Once in a blue moon, even the great Warren Buffett makes a mistake.

In his latest annual letter to his Berkshire Hathaway (NYSE: BRK-A) shareholders, Buffett lamented "some dumb things" he did in 2008. He apologized for his ill-timed investment in ConocoPhillips (NYSE: COP), as well as a smaller stake in two Irish banks, which he dubbed "unforced errors."

And those were far from the first flubs Buffett has made during his illustrious investing career. His purchases of shares in Pier One and US Airways were poor investments, and he compounded his ill-fated acquisition of Dexter Shoes by using Berkshire shares instead of cash as currency. In fact, Berkshire itself was a poor investment -- Buffett greatly underestimated the capital requirements and competitive pressures endemic to the textile industry.

The greatest mistake of all

But when prompted for his greatest investing miss in an interview last year, Buffett didn't mention any of those gaffes. In fact, Buffett's biggest mistake wasn't a bad investment at all -- it was a good investment that could have been great.

"There have been a few things where I've started to buy them and then they've moved up," Buffett said. But instead of adding to his position in these great businesses, Buffett "stopped at a tiny fraction of where we should have gone."

Buffett specifically cited his failure to purchase additional shares of Fannie Mae in the early '80s and Wal-Mart (NYSE: WMT) in the mid '90s. "Both of those deals would have made us as much as $10 billion, and I managed to absolutely minimize the profits," he said.

The Oracle was similarly wistful about Costco (Nasdaq: COST): "We own a little at Berkshire, but we should have owned a lot," Buffett lamented. He blamed his failure to buy more shares on "temporary insanity."

Don't be insane -- swing the bat!

Buffett often likens investing to a game of baseball, where every potential investment is a new pitch, and there are no called strikes. Patient investors can sit back and wait for the perfect pitch, ready to deposit that 2-0 fastball into the centerfield bleachers. But before you step in the batter's box, you must first identify what your perfect pitch looks like.

Buffett likes to swing at easily understandable businesses "whose earnings are virtually certain to be materially higher five, ten, and twenty years from now." After taking too shallow a cut on companies like Costco, he learned that "over time, you will find only a few companies that meet these standards -- so when you see one that qualifies, you should buy a meaningful amount of stock."

Finding your perfect pitch With the stocks of many great companies trading at significant discounts to intrinsic value, experienced gurus like Buffett are swinging for the fences right now. But many individual investors are standing with their bat on their shoulder, letting these perfect pitches float on by. Look at these three great opportunities available today:

Company
(Average P/E Ratio, Last 5 Years )
(Current P/E Ratio )

PepsiCo (NYSE: PEP)
24.2
16.3
Target (NYSE: TGT)
17.7
12.3
Yum! Brands (NYSE: YUM)
23.1
15.2
Data from Capital IQ, a division of Standard & Poor's.

Each of these companies is an easily understandable business whose strong brands mean their earnings are very likely to be materially higher five, 10, and 20 years from now. But while their future growth prospects remain strong, their share prices are the cheapest they've been in years. In such a volatile market, there's a chance these companies could fall farther, but I believe they're much closer to the bottom than the top.

Ready to swing?

Rich Greifner is convinced that this is the year for his beloved Chicago Cubs. Rich owns a Mark Grace rookie card, but none of the stocks mentioned in this article. The Motley Fool owns shares of Berkshire Hathaway. Berkshire, Costco are selections of both Motley Fool Stock Advisor and Inside Value. Wal-Mart is an Inside Value recommendation. PepsiCo is an Income Investor pick.
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