Investment Strategies

Buy And Hold

 Refers to a long term investment approach. A company's stock is purchased with the intent not to sell for a duration which might be from 2 to 15 or even 20 years. Buy and hold is a conservative approach that relies on careful stock selection. Companies with a proven track record of profitablity that have matured into paying and raising their dividend, and establishing a positive earnings record over an extended period of time, are generally good candidates for the buy and hold strategy.

Dollar Cost Averaging

Dollar cost averaging is an investment method that involves applying fixed amounts of money toward your portfolio (or a single stock) at regular intervals. Whether the stock (or the market) is up or down is not considered. This is a “robotic” style of investing that implies a less complicated mechanical effort towards improving investment returns, accomplished by the fact that you buy more shares of a stock when its price is lower than when it’s higher. Similar to the automatic dividend re-investment plan (DRIP) that you can set up in your brokerage account. Whether you are in an automatic DRIP or periodically applying cash funds with dollar cost averaging, you are getting more for your money, buying more shares when the share price is lower, and buying less shares when share price is higher. The amount of your dividend will increase as time goes by (especially if you have been re-investing). When the stock’s share price increases your total return will benefit from the additional automatic investments. It's like getting interest on your interest.

Before You Buy Checklist

1. Check the company's earnings record. A consecutive positive quarterly earnings record is important. Ideally there would not be any negative earnings quarters in the past 10 years. An indication that the company has weathered unfavorable economic cycles. Allowance might be made for  major economic and  market disruptions like the Covid virus pandemic or the 2008 - 2009 mortgage debacle known as the "great recession". Otherwise, a couple negative quarters in the course of 10 years (40 quarters) might be acceptable. 

Almost all the stocks that comprise the Five Year Stellar Stock Index (FYSSI) have the 5 most recent years (20 quarters) of positive earnings reports.

A progressive increase in earnings from past to present would be a plus. Stagnant or decreasing earnings, especially in the recent year or two, might be a sign of trouble ahead. Check out recent financial news for the company on Yahoo finance or similar website. StockEarnings.com. is an excellent website for a company's earnings check up.

2. Check the dividend history at finance.yahoo.com by clicking on “Historical Data” and choosing “dividends”, you can then set the inclusive dates. Or, go to SeekingAlpha.com and click on Dividends then Dividend History or Dividend Growth. The dividendchannel website also offers easy to view historical dividend data.

A progressively increasing dividend through the past 5 or 6 years is favorable. the Five Year Stellar Stock Index (FYSSI) is comprised of companies that have increased their dividend at least 100% in the most recent 5 years past. 

3. Check a company's total return to see if the stock has maintained a positive trend in the past 3 , 5, and 10 year periods. Remember; 100% total return is double your money, 200% total return is triple your money and so on. Use the totalrealreturns website or the dividendchannel site to obtain current total return data.

Stocks in the Five Year Stellar Stock Index (FYSSI) have achieved at least 100%  and 200% total returns in the last 5 and 10 year durations. Many in the FYSSI have done much better than that.

4. Check the Stochastic and Bollinger Bands that you have built into a chart. Finance.yahoo.com or SeekingAlpha.com or your brokerage will allow you to construct the chart.

Bollinger Bands are plotted in the chart. The Bollinger Bands are two continuous lines that form above and below the stock price line.

When the stock price touches or dips below the lower band, an investor might consider this as a buying opportunity especially if the stock has been trending upward for the year. When the share price touches or moves above the upper band, this might be a good time to sell. if you have been waiting for an exit, or,hold off if you were thinking about buying.

The stochastic oscillator basically tells you when a stock is overbought or oversold.

When charting a stock, the fast or slow stochastic is added at the bottom or below the chart and is best accompanied by also adding Trading Volume of each day or week, depending on your chart duration.

You don’t need to have a tight grasp on the math involved in calculating the stochastic. Most chart services will include lower and upper horizontal lines or boundaries that the stochastic line will run between or through. It kind of looks like an EKG heart monitoring line. The upper line will be labeled 80 and the lower labeled 20. When the stochastic lines drop below the horizontal 20 line, it indicates that the stock is oversold. An investor might be inclined to buy when the stochastic reaches or moves below the oversold line. When the stochastic line rises above the horizontal 80 line, this indicates the stock is overbought, where an investor might be inclined to sell or hold off on buying.