I have been spending a LOT of time lately investing, watching markets, and reading and applying some of the different strategies that I have developed. It spurned an interesting discussion today with a smart co-worker, and hopeful colleague about how I trade stocks.

For the last 3 years I have been doing nothing but value plays, period. Putting money into companies, sitting back and hopefully having some gains come to fruition. I have won some, and I have definitely lost on a few plays. The good thing with value plays is that over time, if you’ve done your homework chances are you’ll eek out some kind of win. What this has established for me is a nice solid foundation to my portfolio. I will continue this strategy until I can’t understand how to read balance sheets, income statements and analyze products, or I have spent all of my money on Anheuser Busch products (disclosure long AB).

My discussion from earlier with my coworker, sheds light on an often overlooked part of investing. Since I have spent 3 years building a portfolio, I finally have enough dough to take on some other strategies in parallel with my continued value investments making up the lions share of what I will have when I get older. I can take some of the extra cash and make some speculative plays. Learn how to trade flat markets, play defined risk trades (big thanks to Andy Swan for some great tutorials!) and hopefully throw off some cash doing it. I call this trading for income. In this space things get a lot more dicey with wins and losses and you really have to protect yourself from the down swings. But what you also get a are some chances to hit some big plays. Or hit big runs of consistent plays which is where I want to be.

All the while my value plays will hopefully be increasing my net worth.

I am far from an expert at anything, especially trading, but my general strategy to building my portfolio has been a good one. Start with value plays with products you find interesting or that you have bought. Learn the basics of reading some financials and start dripping small increments of money into plays. Over time it will build and you soon will be turning your attention to income plays where things get a lot more fun.