How do you invest?

For investors and wouldbe investors in the stock market, it’s important to understand that there are a variety of ways to go about investing. Here’s a look at some popular approaches. See which ones are best for you.

DIVIDEND INVESTING >> Dividend investors seek income from their holdings, so they tend to look for stocks with generous dividend payouts and/or track records of regular and meaningful dividend increases. This is a powerful strategy, as dividends from healthy and growing companies are likely to increase over time and are paid in good economies and bad.

VALUE INVESTING >> Value investors aim to buy stocks at prices below their intrinsic value. Buying undervalued stocks builds in a margin of safety and can reduce the odds of being burned by a plunging stock. Great investors such as Warren Buffett have focused on value for decades.

GROWTH INVESTING >>

Growth investors, on the other hand, pay less attention to value and instead seek fast-growing companies. They are more willing to buy seemingly overvalued stocks, hoping that they will keep rising in price.

LARGE-CAP INVESTING >>

This style focuses on big companies, which have gotten big by executing strategies well over time. They are more proven and include many blue-chip names.

SMALL-CAP INVESTING >>

Small companies can be riskier, but they also can usually grow faster than large ones. They may be fairly new, and possibly not even profitable yet.

MUTUAL FUND INVESTING >>

Investors who don’t want to study stocks and make buy and sell decisions on their own can just park their dollars in mutual funds, leaving fund managers to do most of the work. Index funds can be your best bet here, as they have tended to outperform their more actively managed counterparts over long periods.

Note that you needn’t adopt only one of the investing styles above. Many large-cap stocks have solid dividend yields, for example, while some fast-growing companies can also have undervalued stocks. It may also be a good idea to diversify your portfolio with both large and small companies.