FOOL SCHOOL
Choosing An Investment Strategy

February 13, 2002

If you're going down the DIY stock-picking route, then you'll need to get a share selection strategy in place. Because if there's one certainty on the stock market, it's the certainty of losing money by haphazardly picking individual shares on a whim.

It has to be said that for most investors, choosing an index tracker is the best investment strategy of all. Don't make the mistake of thinking that just because 80% of full-time fund managers consistently fail to beat an index tracker, the odds of outperforming the market favour the private investor. They don't.

However, if you're prepared to put in the research elbow grease, stomach severe share price volatility and risk long-term underperformance, then a good next step is to peruse our 'Introduction to Investment Strategies'. There, you'll find an overview of each of the strategies employed at the Fool. But note: they are not magic formulae to make you money, but guidelines to help you form your own stock selection criteria.

While reading the Introduction consider your own personality. All of the strategies have a different approach, not just in the guidelines used, but also in the psychology required. 

For instance, mechanical strategies call for a very unemotional and detached investment approach. Could you invest in what your instinct tells you is a poor company even though the strategy's statistics suggest otherwise? Alternatively, would you be prepared to invest over short timescales using a Value approach, thus requiring more attention to day-to-day market movements? Or would you be comfortable investing in high-risk technology-related companies just like the Rule Shaker?

In short, the key to picking a suitable investment strategy is to know yourself. Your own circumstances, personality and investment ambition will dictate whether an index tracker or one, if any, of the Foolish investment strategies is the most suitable route for investment success.