When entering the stock market for the first time, you may feel overwhelmed by the choices you have. Beyond the task of picking stocks, you might feel daunted by the different strategies for investing.
Loren Fleckenstein, expert investor at CBS's Marketwatch, suggests asking yourself which method best fits your temperament, appeals most to your intuition and accommodates the time you can commit to the market.
The most common techniques are growth, value and index investing. Growth investing targets companies whose earnings are growing at a faster-than-average rate. While these companies usually have a higher price-to-earnings ratio, some critics argue that the premium can add up to a higher payoff in the end.
Value investing, on the other hand, seeks out companies whose stocks are trading at a bargain relative to their earnings. However, Fleckenstein warns against picking stocks with low price-to-earnings ratios or high cash flows relative to price -- ultimately, the best investors know to look at the fundamentals.
If you're still not sure where to start, index investing may be the best approach for you. Marketwatch describes index investing as putting your portfolio on "autopilot", with professional money managers handling your investments.
Of course, Fleckenstein suggests, "You may feel the need to experiment among different styles before settling on a single approach. If you fall in this category, try paper trading. Don't put up your hard-earned cash until you have made up your mind and are prepared to face the market with a deliberate approach!"
