Financial Markets Book Financial Markets For The Rest Of Us
An Easy Guide To Money, Bonds, Futures, Stocks, Options, And Mutual Funds
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by Robert Hashemian

Page 255

expected to be on an accelerated growth path for some time and that is their lure. If the growth predictions about these stocks hold true, they will eventually stabilize at some point and turn into value stocks, but meanwhile profiting their early investors handsomely. For example, some would claim that Intel, Microsoft, and Dell (all spectacular growth stocks) have begun to show signs of stability and have become value stocks. The same holds true for AOL after its merger with Time Warner. Unfortunately for every investor who got on the AOL train early on, there are thousands who made bad choices in their investments in growth stocks.

A conservative strategy may not necessarily be just a one time buy and hold. Here are two specific strategies practiced by many conservative investors that involve a few trades every year:

Dogs Of The Dow - Also known as High Yield 10, this strategy involves investing in 10 DJIA stocks with the highest dividend yields for one year. At the end of the year, rearrange your portfolio by selling some stocks and buying some others so you once again own the 10 DJIA stocks with the highest dividend yields. Keep repeating this every year. The idea is that not only will you get a good return on your stocks due to the higher dividends, but a high dividend stock usually represents a bargain (remember the inverse relationship between the dividend yield and the stock price), which may eventually rise faster than others, providing a second source of good return. This strategy has proven itself over the years to have higher returns than DJIA or S&P 500.

Dollar-Cost Averaging - This method of investing involves spending a fixed dollar amount at regular intervals to buy stocks. The advantage of this strategy is that as the stocks' prices rise and fall during these regular investments, the investor ends up paying an average price for these shares over the long run. This frees the investor from having to time his investments and deal with the risks involved with that.While


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    Table of Contents Copyright and Disclaimer Foreword Money
    Bonds Futures Stocks Options
    Mutual Funds Retirement Final Words Appendix A

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