We’re all looking for cheap shares to add to our investments in 2024, aren’t we?
Here are five ways I’ve seen investors over the years going about it. But be warned, some are better than others.
#1 – Buy the bubble
From the original South Seas one, to the dot com bubble at the turn of the century, oh, and a few in the past couple of years too, we’ve seen plenty of stock market bubbles.
We should just keep well away from them, right?
But, sometimes, it’s only clear it’s a bubble with hindsight, and not obvious at the time. And some people deliberately pile into bubbles thinking they have the timing skill to get out at the top. They rarely do.
#2 – Follow the crowds
Don’t know what to buy? Just follow the crowds and buy what everyone else is buying? They can’t all be wrong, can they?
I won’t knock this one, as it can work. But there are good ways and bad ways to do it.
Buying whatever stock is being pushed in online forums and shouted about by anyone who can find an audience? I’d say that’s a bad way.
But buying a FTSE 100 index tracker, which effectively tries to follow what the whole market is doing, can be a fine idea.
#3 – Buy the fallen
A fallen share is a cheap share, right?
Anyone who bought Rolls-Royce Holdings shares in late 2022 could have quadrupled their money. But then, when my boohoo shares slumped a few years ago, I bought more. They fell further. And have stayed there.
And those who bought Thomas Cook a few years ago when they were down, went on to lose the lot when it went bust.
#4 – Use a valuation strategy
Now we’re getting somewhere. There are quite a few valuation strategies that have been developed over the years, and they can work.
Mine is to go for dividend shares. I look for ones with good yields, good cover by earnings, strong cash flow, and a record of raising their payments each year.
It doesn’t always come good. But over the long term, it’s worked out well a lot more often than not.
So maybe read up on how to buy value shares, and pick something that looks comfortable.
#5 – Pooled investments
Here’s another that I use. If I think one kind of stock is cheap, I might go for an investment trust that specialises in it.
When the dividend outlook’s bright, maybe put some money in a trust that seeks dividend income. I think so right now, and I’ve done just that.
Think the commercial property market looks good? There are real estate investment trusts that invest in that too.
It’s a lot easier to buy a few shares than a whole supermarket, or an office building.
Do it our own way
Whichever approach we take to look for cheap shares, we can do a lot better if we pick a strategy we feel comfortable with. And then stick with it for the long term.
