Stock market is a mad - mad world with different individuals having different plans, calculations, mindsets and goals. One person's poison could be another person's prasadam. There is no one formula or logic that works, everyone needs to find their own approach and strategy. Below are some of my observations on strategies used by different people.
#1 52-week high & low
Under this strategy, you buy a fundamentally good stock when it is near its 52-week low and patiently wait for it to reach near 52-week high and sell it closer to its high price.
Pros | Cons |
Don't have to track daily or research too much. Buy at good valuation and patiently hope and wait for market & stock to recover.
Good stocks usually appreciate over time along with market. | No guarantee that a stock will not slide below its 52-week low or shouldn't raise above its 52-week high
Wait time could be very, very long, like a few years
Missed opportunity if it reaches say 75% of 52 week high and then drops before you sell |
#2 Swing trading
Many hunt for good stocks with immediate upward potential, wait a few months and sell if they get decent (like 20-30%) upside
Pros | Cons |
Better profits
Good for regular profit booking
Can use margin trading facility offered by broker | Risk: Not all buys result in profit. May have to book loss as well.
Many stocks continue to rise after selling |
#3 Dividend chasers
Some people chase good dividend yielding stocks, buy and simply stay put for years, not bothering to book any profit. Regular dividend income keeps them happy.
Pros | Cons |
Don't have to worry about fluctuating prices
Steady income without having to book profit
Tax as per income tax slabs, good for those in low income brackets | -Dividend amount n time not in investor's control.
-Company may reduce dividend amount next time, or stop it if in loss or want to invest
-Need to wait 3 to 12 month for next dividend
- Price drop on ex-dividend date could be more than dividend value |
Click here to read about last year's best dividend stocks
Also read: Reverse Dividend strategy
#4 Listen to experts/friends
Some people invest based on advise from experts, influencers or friends, instead of doing their own research.
Pros | Cons |
| Might just get lucky & make money without too much of own research | -It is usually too late. Many other people also listen to save expert/influencer and might have already made the move. So your gain will be minimal
- Many influencers are paid to promote a specific stock so that large houses and sell at profit once retailers start buying and price goes up. You may end up getting trapped buying at high price and not much returns |
#5 Penny stock hunters
Many investors look for stocks of very low pricing, like under INR 10, put some capital and hope the stock appreciates and their investment grows 10x, 100x
Pros | Cons |
Loss is limited
| - There are 1000s of penny stocks- choosing right one is very, very tough
- Investing small amount doesn't make much difference even if stock goes 10x-20x. One should invest a large amount for massive returns- lots of risk and very little probability of reward
- They are penny for a reason- majority of investors do not see any value. Need lots of research, conviction and patience to choose right stock and wait for reasonable time for it to become multibagger |
#6 Sector betting
Some investors constantly look for next sector which may grow exponentially. They invest across multiple companies in this sector, hoping few of them will give massive returns. As of now sectors like AI, Renewables, Data centers etc are in demand.
Pros | Cons |
Loss is limited, if right sector is selected and sector grows at decent phase.
| - Hot sectors keep changing every 6-12 months, returns take time
- Some hypes fizzle out after time resulting in massive loss |
#7 Index investing
Similar to sector, this approach involves choosing a specific index- like NIFTY 50, NIFTY next 50, BANK NIFTY, Small cap and so on.
Pros | Cons |
Choosing stock becomes easier
| - Growth largely depends on luck & patience |
#8 Chart Busters
Heavy into monitoring charts and candles to hunt for opportunities and invest based on their analysis and intuition. You have to factor liquidity, volume and many other factors to predict price movement.
Pros | Cons |
Can give minor but consistent gains every day
Works for those having suitable expertise, time and infra setup | - Needs real time tracking and impulsive decision making
- Big players like FIIs, DIIs often trigger false breakouts to trap retail investors |
#9 News & Corporate Result based decisions
Buy if company's result is good, sell if it is not. Buy if there are some positive news about the company, sell if news is negative
Pros | Cons |
| Ride the wave- there will be initial reaction- either impulse buying or panic selling based on positive or negative news. Those on top of news can use this for intraday gains, short selling etc | - Not all news items result in long term profit or loss. Price recovers after initial hype or panic. |
#10 Insider trading
This is illegal and not possible unless you can get some confidential information from a company's boardroom before rest of the public learns about it.
Which one is your magic poison? Do let us know
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