Another example of buying what you know would be purchasing stocks of companies that operate within your area of expertise. For instance, if you're interested in cars, you may be adept at picking good auto stocks. But it must be remembered that you must keep your portfolio diversified to ensure that all of your stock holdings aren't too closely related to your area of interest or occupation.

Market timers try to anticipate price movements and aggressively buy and sell based on those predictions. Most investors using this approach employ technical analysis as their method of predicting the movements �although it's possible to use other means, such as daily movements or multiyear cycles. Some are very successful at it; nevertheless, market timing is extremely difficult.

Becoming popular in the 1990s, day trading is closely related to market timing. It involves the rapid buying and selling of stocks, with all activity usually occurring within a single day. The rationale that drives this technique is that since stocks move up and down throughout the day, it should be possible to buy a security, wait for a small move upward, and then sell it. But it's far from easy, and the commissions and taxes that are normally involved with buying and selling stocks make it even more difficult to consistently earn a profit.

The Dogs of the Dow, as the Dow dividend strategy is called, is a fairly straightforward way to invest in stocks. It works in this manner: at the end of every year, you buy the ten highest-yielding stocks from the list of 30 that comprise the Dow Jones Industrial Average, putting the same amount of money into each one. You then hold these ten stocks until the next year, at which point you repeat the process, keeping those that remain in the top-ten list and selling those that drop out. With the proceeds, you purchase the newcomers to the top ten. Historically, this strategy has worked well �even during periods of overall market weakness �because over the long term stocks have tended to increase in value.

Dollar cost averaging is arguably one of the safest and most powerful methods of investing in use today. It involves investing a fixed amount of money into the same stock (or group of stocks) on a regular, ongoing basis. The rationale behind dollar cost averaging is that you establish a position in a stock over a long period of time. During that time, the stock's price will likely fluctuate, but by investing a set amount every month, you actually benefit from the periods of weakness. This occurs because for the same amount of money, you can buy more shares when the price is lower. As long as the stock's price increases over the long haul, you'll do well. Another significant advantage of this approach is that once you set it up, it automatically forces you to continually contribute into your investment plan.