If market outperformance is your goal, stick to the 3 best methods for selecting stocks:
1. Momentum investing
Momentum stocks are companies that lead the market in sales and earnings growth, product innovation, and price action. They tend to rise faster in a bull market and fall harder in a bear market or correction.
2. Value investing
Value stocks are companies that are cheaper than most on the basis of price-to-sales, price-to-earnings and price-to-book value. They often pay bigger-than-average dividends too. These stocks may rise less in a bull market but hold up better in a bear market.
3. Follow Industry Insiders
Insider stocks are the ones where the officers, directors and beneficial owners are buying substantial amounts of their own companies’ shares with their own money at current market prices. Considering, these individuals have access to all sorts of material, non-public information about their companies’ future business prospects, it’s no surprise that these stocks tend to outperform in good times and bad.
These are 3 different approaches requiring entirely different methods but they all work over time. None involve trying to time the market. But have on mind, successful investing does not only rely on when to buy but also knowing when to get out.
Sven Franssen