Everyone who invests in the stock market does so to increase the return on their money. However, you may be asking yourself the question of how you can increase your stock market returns. The first thing is that you need to remember with your investing strategy is that the point of investing should be to beat inflation. Those investors who try and hit the home run usually end up striking out. Most investors need to realize that the best reason to invest is to grow your money consistently. The stock market will experience ups and downs, but the overall trend of the market will be up. With a proper investing strategy, you should be able to beat the inflation monster.

If trying to hit the home run is the first mistake that investors make, the second mistake is not diversifying enough. You need to make sure that your investments have the proper asset allocation. With the correct asset allocation, some of your stocks will go up when others are going down. You will also be able to diversify your way to higher returns with lower risk.

Another suggestion for your investing strategy is to realize that bear markets do end. Many times the bear market will end before people realize it. I remember during the last recession, we were six months out of it before the economists announced we were out of the recession. You need to watch the signs of the times to see the trend. Make sure you are invested in the stock market when it goes up or you will miss out on the opportunity.

One of the ways to identify the end of a bear market is a contrarian method. The viewpoint is that if the consensus view of investment advisors is gloomy, then it is time to get into the market. Another identifier is when the market stops falling on the announcement of bad news. There is a theory that states that most of the weak sellers have sold out, and the market will not react any longer to additional bad news. Investors will merely shrug off the bad news. The beginning of an increase in IPO’s is another sign that companies are getting good feelings of where the economy is going.

Also watch for articles discussing the sentiment of the company’s accountants. If the accountants have a good feeling about the timing to begin spending again, then it can be a sign that things will improve in the next six months. The accountants are the ones who will decide it is time to begin purchasing and hiring. They are a conservative bunch, so if they feel good, then you can feel good also.

There is another article titled “investing for growth” posted on this site. It will give some additional tips on how to enhance your trading strategy.

All of the content published on this website is to be used for informational purposes only and without warranty of any kind. The materials and information in this website are not, and should not be construed as an offer to buy or sell any of the securities named in these materials. Trading of securities may not be suitable for all users of this information.

An informed investor will understand the need for proper diversification strategies within their investment portfolio. They will know that this is the only way to truly enhance their stock market returns while at the same time, minimize their risk. The stock market does not reward you for taking unusual risks. The best method to use with your investment strategy is to create a portfolio which gives you the best chance to make money.

In a study completed by Professors Alok Kumar and William Goetzmann, they found that the individual investor does not properly diversify their stock portfolio. In their study completed in the 90’s, the younger, less wealthy, and non-professional had the least diversified portfolios. About 25 percent of the funds held only one stock and about half of the portfolios held only one to two stocks. Those individuals who did try and diversify by purchasing multiple stocks were haphazard in their investment style. They did not attempt to find those stocks with minimal correlations. It appeared that they were merely following the herd. Going with what the crowd said was a winning stock pick appeared to be their investment strategy. It kind of reminds me of young children playing soccer. Instead of having a well thought out plan, the investor simply tries to follow the ball around the field with the other investors.

Make the decision right now to look at your investment portfolio. Find an asset allocation calculator or site that will help you to determine what stocks have low correlations. I have discussed asset correlations in other postings. One of these articles is entitled “stock-market-diversification-tactics”. This will give you some additional ideas on asset correlation tactics.

In your stock diversification strategy, you should invest across different asset classes. You should also diversify your different investments within each asset class, and across industries and sectors. You can check out the article entitled “strategies in picking winning stock sectors” or “which sectors are going to be the best investments for growth” for ideas on finding stock sectors to invest in. Both of these articles are on this site. Another diversification tactic is to maintain a form of liquidity. You do not want to be 100 percent invested in non-liquid investments and have a financial need arise, or find another investment you wish to take advantage of.

Your asset mix will also depend on your age and how soon you are to retirement. If you have taken the correct approach to diversifying your investment strategy, and taken advantage of all opportunities to invest for your retirement, you will be like an acquaintance of mine. He happily decided to leave the rat race and retired a few months ago. I would hope that each of us could be in that situation when the time comes.

If you were to search on the internet for methods to predict stock market returns you would find a lot of different ideas. Everyone claims to have the crystal ball of what is going to happen. An interesting quote from Edger Fiedler is “He who lives by the crystal ball soon learns to eat ground glass.” The truth is that no one really knows for sure. However one idea to use to predict stock market returns is to use technical analysis on the S&P 500.

The S&P 500 is nothing more than a collection of the stock prices of 500 large-cap common stocks traded in the United States. These 500 companies trade on either the New York Stock Exchange or NASDAQ. It is becoming more followed than the Dow Jones Industrial Average and is considered a bellwether of the American economy. Using technical analysis on the S&P 500 you may be able to predict what the future may hold. At least you may be able to determine what your current action should be.

If you were to look at a chart of the S&P 500 over the decade of the years 2001 – 2010, it would literally scare you. The amount of volatility in the market is astounding. There are enormous swings both upward and downward. The stock market literally did not know where it was going. If you were lucky enough to be in the correct investments on the upward swings you had the potential to make a lot of money. . If you were to go to the site http://www.moneychimp.com/features/market_cagr.htm which is a good chart of the S&P 500 you would notice that in 2006 the market went up 16% and then in 2007 dropped to 5.5%. In 2008 it dropped further to a negative 37% and then swung upward in 2009 to a growth of 27%. If this were a company you were looking at investing in, you would run from the investment due to the volatility.

The problem is that this is not one particular company, this is the stock market and you as an investor need to decide what you are going to do. The question now is concerning 2010. What will the stock market do in this period of time? Using a chart found at CNNMoney.com, http://money.cnn.com/quote/chart/chart.html?pg=ch&symb=SPX, various scenarios can be plugged in and some technical analysis ideas performed.

One item to look at is using the Williams %R analysis technique. This is a method developed by a trader, Larry Williams, and its purpose is to tell whether a stock is trading near the high or low or somewhere in between of its recent trading range. If you were to change the time to one month, the frequency to daily, the lower indicator to Williams %R and then create the chart, you would find that the Williams %R is at the top of the chart or at zero. According to expected interpretation of the analysis, this indicates an overbought situation. According to Larry Williams, when the analysis reaches zero and then begins to drop, it may be time to sell. The analysis indicates that the market will then trend downward.

Since October, 2009 the S&P 500 has been trading within a range between 1000 and 1150. Until it breaks out of that range, either upward or downward, the technical analysis probably does not mean much unless you are a day trader. If you are invested for the long-term, then it is probably right to hold the course and watch the trends. If the stock market breaks out of this trend then further analysis and study of current economic conditions is warranted.

All of the content published on this website is to be used for informational purposes only and without warranty of any kind. The materials and information in this website are not, and should not be construed as an offer to buy or sell any of the securities named in these materials. Trading of securities may not be suitable for all users of this information.