2 tried and tested “expert” investment strategies...

Highlights in this issue:

*** This strategy is boring....
*** A powerful balance during explosive markets REVEALED...
*** Make R6,724.50 by changing 1 aspect of your investment strategy... and more...

From Gary Booysen on the top floor...

Dear Investment Academy Reader,

I’ve been watching the markets and listening to people. Everyone seems very nervous. The fundamentals continue to disappoint despite the market’s run…

The JSE All Share Index (or Alsi) has risen from the gloomy depths (when it closed at a dismal, rock-bottom 17,814 in December) to close at 25,186 last night. That’s a massive 41% gain in only two quarters.

Yet, this recession continues and the Baltic Dry Index (a global shipping indicator and a fairly reliable gauge of the level of international trade) has collapsed 20%.

People are right to be nervous. But that doesn’t mean YOU should be, because today I’m going to show you two tried and tested investment strategies. You can apply these successfully no matter what the market’s doing.

WINNING STRATEGY #1: Buy and hold

Proven gains… if you have the patience

A buy and hold strategy is exactly what the name suggests. Once you buy in, you don’t sell out. As simple as this strategy seems, you need incredible discipline to master it. MoneyWeek editor Gareth Stokes equates it to “buying a Ferrari and never driving it!”

Damn, that’s frustrating, right! But there are huge advantages to this strategy.

Many studies conclusively prove that being in the market over a long period of time is better than diving in and out.

The capitalist engine that drives the modern world is partly responsible for this. Over the very long-term, we’ve seen incredible progression as free markets have, through the process of creative-destruction, advanced our standard of living… giving us a myriad of products. In fact, if you look back far enough, the current financial crisis is nothing but a minor blip. The overall trend is firmly upwards.

It’s this trend that the buy and hold strategy takes advantage of. Sure, it’s not the most exciting strategy in the world, but you’ll pay less on investment costs… you’ll make huge savings on your brokerage charges… SARS won’t siphon your profits away… and even better, you’re much more likely to beat the markets in the long run.

As “The Oracle of Omaha” (Warren Buffett) says:

“I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.”

Listen to that advice. It’s made him billions.

WINNING STRATEGY #2: Rand cost averaging

But don’t let the winds of speculation buffet your pension

With this strategy, you divide up your planned investment and feed it into the market at different times. This helps you sail through short-term fluctuations in market value.

The current market is exceptionally volatile. So, when you buy in may seriously affect your profits.

Again, you need discipline for this investment technique to work for you. Here’s why…
 
 

But, if you’d invested all R60,000 in May, you would have had 440 shares and R89,012 by the end of the year.

If you had invested it all in June, just one month later, you’d only have had 365 shares, worth R73,839.50.

So, apply this rand cost averaging strategy. Don’t invest one lump sum, instead spread your investment over 12 months or so.

Until next time – keep learning!

Gary Booysen
For the Investment Academy