| When it comes to trading on the stock market, | | | | the Dow Index have long histories of reliable |
| there are two choices to make, either randomly | | | | performance, so the ten lowest components would |
| choosing and hoping for luck or using strategies to | | | | therefore have the greatest growth potential in the |
| determine what stocks to buy, when to sell and how | | | | short-term. The new Pigs of the Dow strategy is an |
| to protect your investment dollars. It is much smarter | | | | offshoot of the Dogs of the Dow. The Pigs strategy |
| to use strategies, but the investor will have to | | | | works by selecting the five Dow stocks with the |
| choose from hundreds of different strategies. There | | | | worst performance over the past year. The idea is |
| are a couple of methods that have worked well for | | | | that the Pigs will rebound and perform better than |
| many years. Beginners should first investigate these | | | | the rest of the Dow components. |
| basic strategies to see how they perform, and then | | | | When you buy stocks on margin, you are borrowing |
| the investor may explore new methods. | | | | money to pay for your investment. If the margin is |
| Protecting your investment by reducing the risk that | | | | 100%, you can buy twice as many shares as you |
| comes with holding a certain stock is known as | | | | would have if you did not buy on margin. Usually, this |
| hedging. A put option makes it possible to sell the | | | | loan comes from your broker. The upside to buying |
| stock for a set price during a predetermined period | | | | on margin is that your money goes further. The |
| of time. This will offset some risk that comes if the | | | | downside is that if the stock goes down, you will still |
| stock decreases in price. The put option value is | | | | have to pay back the loan. Therefore, you should |
| increased if the price of the stock happens to fall. | | | | limit your margin buying and place stop-loss orders to |
| The most costly hedging strategy is that of buying | | | | put a floor on your losses if the market should go |
| put options against individual stocks. Buying a put | | | | against you. |
| option on the stock market itself may be a better | | | | One of the best ways to grow your investment |
| idea if your portfolio is broad. That way, you will be | | | | securely and effectively is to use cost averaging. The |
| protected against general declines in the market. | | | | idea behind dollar cost averaging is to purchase a set |
| Selling financial futures, such as the S&P 500 | | | | dollar amount of stock or mutual funds on a set |
| futures, is another trick to hedging against market | | | | schedule. For example, you can purchase $100 of a |
| declines. | | | | particular mutual fund every month. The idea behind |
| This strategy was used by many during the 1990s | | | | this is that you will be making purchases in both rising |
| bull market. The strategy works by choosing the ten | | | | and falling markets. As the price rises you will be able |
| stocks out of the 30 in the Dow Jones Industrial | | | | to buy fewer shares and as the price falls you will be |
| Average that have the highest dividend yields and | | | | able to buy more shares. |
| lowest price-to-earnings ratio. All the companies on | | | | |