Beating the market, who doesn’t want to do it? When it comes to beating the market, people automatically turn to the S&P 500 index. It turns out that it is hard to have above-market gains over a long period. This does not mean it is impossible: one should simply follow a clear strategy.
1. Dollar-cost averaging
There is no such thing as the best price on the stock market. Stocks fluctuate almost every second and timing the purchase of a stock is hard, if not impossible. Therefore, if you have trust in a specific stock, purchase it in batches over time. Hereby you reduce the risk of sudden massive changes in the market. This strategy is also known as dollar-cost averaging and helps you to sustainably grow your portfolio.
2. Be careful with meme stocks
Meme stocks and Penny stocks are all the rage with investors across the globe. Often available at a very low price per share, these stocks offer huge upside potentials. However, what happens with these stocks is that the intrinsic value of a stock (e.g. assets, revenue potential) is overshadowed by the demand for a stock. By hyping the stock on social media and internet forums, the price is rapidly increased but can come crashing down at the same speed when people start selling off.
3. Balance blue-chip and growth stocks
Blue-chip stocks are well-established and reputable companies with solid returns. These companies should function as the foundation of your portfolio: slower but steady growth combined with dividend payments. This is a low-risk foundation that can be complemented with growth stocks: these do not have dividend payments but offer a large potential upside. By combining the two, you have a solid strategy to beat the indices as you can grow faster while maintaining a low-risk foundation.
4. Turn the Prospect theory to your advantage
The Prospect theory refers to the emotional behavior of people when it comes to investing. People tend to be loss-averse, choosing an option with the least possible loss over an option that has potentially the highest gain. This leaves room for investors to take advantage. You have to stay objective, read up on the stock, industry, financial statements and analyze the stock price. And a good way to do so is by using a stock market tracker. This helps you to spot opportunities with higher gains while looking beyond the potential loss.
5. Leverage a stock market tracker
To monitor your stock market positions, a stock market tracker can come in handy. Such a tracker allows you to have a collection of all your stocks as well as other assets such as bonds and cryptocurrencies. They do not only provide real-time stock data but also offer news, analytics, and notifications per your needs.
Pursuing portfolios with different strategies
Within a stock market tracker, you can create separate portfolios. For example, you can create portfolios for different strategies. This helps you understand which strategy works well, and you can benchmark them against your other portfolios as well as the market.
Want to learn more about stock trackers and their functionalities? A leading provider of tracker technology is providing information and an FAQ on their website. You can visit them through the following URL: https://delta.app/en.