LemonTrades
TL;DR
- The simplest strategy, buying a low-cost index fund and holding it for years, beats most professional investors over long periods.
- Others trade more effort or risk for a different goal: income (dividends, bonds), bigger growth (growth stocks) or bargains (value).
- Pick by three things: when you need the money, how big a fall you can sit through, and how much time you want to spend.
- LemonTrades tells you what moved your investments, and why, as it happens, whichever strategy you follow.
An investment strategy is just a plan for what you buy, when, and why. Here are the eight most people use.
The eight strategies
| Strategy | How it works | Effort | Risk |
|---|---|---|---|
| 1. Index investingbuy and hold | Own the whole market through a cheap fund, and keep it for years | Very low | Market swings |
| 2. Dollar-cost averaging | Invest the same amount every month, whatever the price | Very low | Market swings |
| 3. Dividend growth | Own companies that raise their payouts every year | Low | Medium |
| 4. Value | Buy companies that look cheap against their profits or assets | Medium | Medium |
| 5. Growth | Buy fast-growing companies, often at high prices | Medium | High |
| 6. Asset allocation | Mix stocks, bonds and cash, and rebalance once a year | Low | Lower than all stocks |
| 7. Income | Bonds, Treasury bills and option-income funds for cash now | Low | Varies |
| 8. Active trading | Buy and sell over days or hours on news and charts | Very high | Very high |
1 and 2: index investing, monthly
Most people do best combining these two: a fixed amount every month into a fund like VOO or VTI. Over 15 years, most actively managed US stock funds have trailed their index after fees. It’s boring, and it works.
3: dividend growth
Companies that raise their dividend every year tend to be steady, profitable businesses. You get rising cash income and usually smaller falls in a crash. See best dividend stocks for beginners and the SCHD dividend calculator.
4 and 5: value vs growth
Value investors look for bargains, such as banks or energy companies on low earnings multiples. Growth investors pay up for fast growers like the big AI names. Each style has long spells of beating the other, so many investors own some of both.
6: asset allocation
Decide how much goes into stocks, bonds and cash, then rebalance once a year back to those shares. That sells some of what rose and buys what fell. A target-date fund does this for you. More: how to invest $100,000.
7: income
For cash now: Treasury bill funds like SGOV, bond ETFs, or option-income funds such as JEPQ. The highest payouts often come with a shrinking share price.
8: active trading
Day and swing traders aim to profit from short moves. Most lose money over time, and it takes hours a day. If you try it, news moves prices fastest. See is day trading worth it and a gold trading strategy.
How to choose
- When do you need the money? Under five years: more cash and bonds.
- How big a fall can you sit through? Stocks have halved twice this century.
- How much time will you give it? If the answer is “very little,” choose strategies 1, 2 and 6.
Check any plan against how to evaluate investment risks, and start with how to start investing money.
Sources
- S&P Dow Jones Indices: SPIVA, active funds vs their index
- Investor.gov: Asset allocation
- Investor.gov: Assessing your risk tolerance
Education, not financial advice. All investing involves risk, including the loss of your money. See our disclaimer.
