Candlestick Trading Blog

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Investment Philosophies – Shaping Your Future
It seems like developing an investment philosophy is automatic. No one would venture into the stock market without a clear understanding of what they want to accomplish and how they are going to do it. Yet surprisingly, many people do not have an understanding of this stock investing concept. It is important to look at how you want to make your money and most times, your investment philosophy falls into three main categories: growth investing, income investing and value investing.

Growth Investing
As the name implies, growth investing is the investment philosophy of looking for the big winners in the stock market. Growth investors are looking for companies that possess a high potential for growing earnings. In theory, high growth equals high stock prices and in turn, high profits. People involved in growth investing take their risks wagering that young, upcoming companies will break through and become leaders in their industry. Google stock is a perfect example of a growth stock, as were technology stocks in the 1990’s.

Many companies that fall into this investment philosophy started with a dream, an idea and nothing else. They were able to overcome the obstacles and become strong profitable companies. Most of the companies in this investment philosophy look like rising stars until reality sets in and they turn out to be falling stars instead. This investment philosophy offers risk reward ratios that are quite drastic. While the rewards can be very high in growth investing, the risks are higher as well.

Income Investing
Income investing is the most conservative and easy to understand investment philosophy. Income investors target companies that consistently pay high dividends. This is one of the preferred stock market strategies for those around retirement age. This investment philosophy looks for companies that tend to be large and well-established. As taught in stock market investing 101, there are always risks, but income investing is the most conservative approach. If such a company’s stock increases, the investor can cash in, trading some capital appreciation for a higher dividend.

Value Investing
Value investors look for one thing; they look for stocks that have been overlooked by the market. While this doesn’t necessarily mean they have a low share price, it does mean that for whatever reason, the market has undervalued a particular stock. Many times, a stock gets overlooked while investor chase profits in another related sector or in a company that is in the same sector but is perceived differently by investors. Stock technical analysis is important with such companies since an investor doesn’t want to confuse undervalued with underperforming. A value investor can look at the price to earnings ratio as one guide to the value of a stock. The hope of the value investor is that the market will recognize the worth of the company and its stock will be bid up to true value, realizing a profit for the trader.

All three investment philosophies are viable and valuable to successful traders. It is neither required nor recommended to strictly follow one particular strategy. One of the keys to a profitable stock trading plan is to have a diversified portfolio; one of the keys to having portfolio diversification is to utilize various trading techniques. One of the best ways to shape a profitable trading future is to take advantage of each investment philosophy that is available.

Although everyone who is investing in the stock market wants to say it; many have said it when it was the farthest thing from the truth. The statement, “I beat the stock market” is a goal of every trader, successful and unsuccessful alike. For that matter, what is wrong with wanting to play the stock market game?; the measure of a trader’s success is his or her performance against its standard. In order to understand “winning the stock market game”, it is important to define what the stock market is. The S&P 500 Index is widely considered the barometer for performance. Such a standard has its flaws since S&P is heavily weighted with large cap stocks. With that being the case, let’s look at a couple of other measurements for winning the stock market game.

As the Google stock price for the Internet search giant passed $500 per share in late November 2006, it continued to evolve as a true force as reported in Wall Street news. The Silicon Valley based firm has moved into the number two spot among all Valley companies in market value, surpassing such companies as Intel Corp, while trailing only Hewlett-Packard Co. Ironically, HP was started in a garage sixty-seven years ago and Google was also born in a garage eight years ago. Google’s powerful rise makes them currently a strong investment option and an excellent target for long term investing.

The incredible success of Google has made multibillionaires of its two founders and its chief executive, as well as making millionaires of hundreds of other Google employees. Many successful traders are looking to own a piece of the Internet’s most powerful company. Google has created a brand recognition so strong that the term “google” has become a part of the English language. All of this has vaulted Google stock into not only rarified air with its stock price history, but cemented its reputation as an investment option while leading investors to use it as a part of their stock market strategies.

Since its emergence as a publicly traded company in August 2004, the Google stock price has steadily risen. The Google stock IPO was $85 per share and the company broke the $100 per share barrier the same day. Google’s trip to $200 per share took less that three months and seven months later, the $300 plateau was reached as well. The Google stock price achieved $400 per share in November 2005. Such a steady rise has caused Google stock to become a reliable portfolio diversification tool for many investors.

Google has used its recent acquisition of YouTube Inc, to fuel this latest climb in stock price and as the company introduces new ways to glean more dollars from online advertising, it is extremely likely that the strength of this investment option called Google will continue to grow.

As investors perform fundamental and technical analysis looking for trade prospects, companies such as Google will continue to rise to the top of the list. While the price per share is prohibitive for many investors, Google stock shows no signs of slipping as an investment option. Analysts generally do not view the Google stock price as over-inflated, citing its rapid growth that many believe will push the company’s market value above $200 billion and its share price over $600 in the next year. Google has shown an aggressive approach to future growth and should be viewed by those investing in the stock market as an investment option not only today, but well into the future.

Google’s rise from the garage in eight short years has been powerful, affecting the Internet and Wall Street alike. As its stock price breakouts soar to new heights, Google will continue to be a strong investment option for many years.