MARKET COMMENT
Picking The Perfect Investment Strategy

By Maynard Paton (TMFMayn)
December 19, 2003

Success on the stock market requires a proper investment strategy. Being able to spot shares that conform to tried and tested guidelines will always beat intuition, hunches and pure gut feel. Trouble is, the novice stock picker is deluged with 'proven' investment techniques to choose from. Long-term buy and hold, short-term value, charting, mechanical investing and a myriad of sub-strategies: where to start?

A common solution is to have a go at everything. Divide your cash into separate chunks and operate a handful of portfolios under different strategies. Unfortunately, this is probably the worst possible way to start a stock market career. Getting your head around one investment technique is bad enough; trying to put into practice two or more is just asking for trouble. Chances are shares will be bought with one strategy in mind, but sold with another (usually at the most inopportune moment). What's more, you'll be stretched in all directions as a multitude of companies match your multi-strategy approach.

What investors need is focus. By concentrating on just one strategy, the information overload is curtailed and the number of shares coming into view can be reduced significantly. Certainly for those starting out, keeping things simple is a key investment tenet. Ideally, beginners ought only to devote a proportion of their stock market cash to a single stock picking technique, leaving the rest in, say an index tracker, or uninvested.

Of course, picking the strategy to use won't be easy and a fair amount of time will have to pass before any judgement on its suitability can be made. Yet consistently beating the market has always required concentration, commitment and belief. Apply one technique, refine it as and when, then ultimately stick with it or ditch it.

More: Why You Need An Investment Strategy | Investment Strategy discussion board

A version of this article was originally published in March 2003.