The 200-day investing rule that helps YOU beat the market – and the three stocks experts think will soar

KEEN to invest but have no idea where to start? A simple line on a chart could be the answer to help you get rich. Forget hours tracking stock prices or paying city bankers to invest your money for you. Here, top money experts explain how you can use the simple 200-day investing rule to figure out when to buy a stock for a great price. A simple 200-day rule could help you start investing Credit: Getty The rule removes the need to spend hours tracking stock prices or spend hundreds of pounds paying bankers Credit: Getty Investing is the best way to make your money work harder for you. Studies show that there’s a 90% chance of making more money investing in the stock market when you do so for the long-term, rather than leaving it in a savings account. If you buy a stock, you own a tiny slice of the company. But it can be difficult to see whether investing in a company is worth it if the share price – how much it costs to buy a single stock – is up and down like a yo-yo. That’s where the 200-day rule comes in. The 200-day rule calculates the average stock price over the past ten or so months. By focusing on 200 days, you cut out the daily ups and downs of the market to show you whether a company’s value is on an upward or downward trend over the long term. When a share trades above its 200-day average, it shows that it is on a long-term upwards trend, so its value is increasing over a set period of time – which is good news. There are two key things to keep in mind. If the share price rises above the 200-day average, experts say you should consider holding on to your investment if you’ve already bought shares in the company. And if you haven’t yet bought shares, experts say you should usually wait until the shares fall below their 200-day average. That’s because if the share price dips down to or below the line, you’ll be buying stocks at a discount. Experts say the rule can help you spot companies to invest in at bargain prices. What are the risks I need to watch out for? BEFORE you start investing, you need to understand the risks. The return you make will depend on how much you invest and where you put your money. As we have seen recently, the stock market can dramatically fall. The US market last year saw its biggest drop since the start of the Covid pandemic after President Donald Trump announced plans to introduce tariffs on goods imported from other countries. The UK’s own stock market, the FTSE 100, fell by more than 10 per cent after the news. You must be prepared for the value of your investment to fall as well as rise – so only invest money you can afford to lose. You need to be willing to invest cash for at least five years to mitigate any dips in the market and allow your money to recover. If you can’t afford to lock up your money for this long, investing may not be right for you. It’s usually better to drip-feed money into your investments instead of putting down a big chunk of money in one go. Before you start investing, experts say you should have a minimum of six months’ of wages in a savings account for emergencies. Wait… how do I know a stock is worth investing in? First you need to figure out whether a stock is worth investing in. The 200-day rule won’t tell you when it is worth investing in a company – only WHEN you should consider investing to nab a good price. You should read about whether a company is currently performing well by reading its company results. The key is to read investment news boards and forums to see what stocks other people are talking about. Make sure to read company results and updates in business sections, and keep tabs on the wider news. I turned £20 into £20k and beat my investment fears Although Ela Prakash spends her days scrolling through spreadsheets and doing calculations, when it came to investing her own cash, fear took over. Despite being an accountant, the thought of investing made her stomach churn. Then in 2022 she decided to take the leap with a small deposit of £20 and has never looked back. Ela, 29, invested small amounts of spare cash when she could afford to and has grown her pot to £20k. She explains: “I studied economics and finance at university, but they don’t teach you how to pick the best investments.” Ela opened an account with the investing app InvestEngine in August 2022. She chose the app because it has zero fees and seemed easy to use. She put her £20 investment into a fund that tracks the S&P 500, which is the US stock market. The fund works a bit like a shopping basket of investments, which are small stakes in companies that you can buy. In a few months the value of her investment increased by around 10%, while in comparison she was earning around 1-2% from her cash savings account. In 2024 she added a second fund to her portfolio, which tracks the Nasdaq 100, an index of US technology companies such as Nvidia, Apple and Microsoft. More recently she has also invested in the iShares Physical Gold ETF, which tracks the gold price and is up 65% over the past year. She has also invested in the VanEck Semiconductors ETF, which invests in companies that make specialist computer chips including ASML and Taiwan Semiconductor, and is up 70% over one year. Now her investments have increased in value by 49% and she has more than £20,000 in her pot. She doesn’t invest a set amount of money and instead aims to add £500 to her account every month on average. She said: “I love seeing my money grow. This is my very long-term pot for the future – I’d love to use it one day to help my parents retire and to buy a house. “People think investing is only for rich people with thousands of pounds, but I started with £20.” Investing in individual stocks is a risky strategy. That’s because you are relying on the fortunes of just one company to grow your money. So, make sure you are only investing money you can afford to lose. If you’re a beginner investor, you’re better off investing in a fund instead. A fund is like a shopping basket of goods including stocks, bonds and property, which are managed by a professional. Investing in many different stocks is known as “diversification”. This can be a good investment strategy because it means that if one of the shares takes a dip, others that have performed better should offset the loss to give you steady returns over the long-term. How can I use the 200-day investing rule? You can use the rule to compare the performance of different stocks Credit: Getty You’ve worked out whether a stock is worth investing in or not… now is the time to use the 200-day average rule. Many investment platforms such as AJ Bell or Hargreaves Lansdown offer charts and tools that let you view a stock’s 200-day average. To view it you will need to download the investment platform’s app. Next use the search bar to type in a company’s name and click on that stock’s overview page. When you look at the main display area a miniature line graph or price trend should normally show up by default. If you click on the price chart it should open an interactive full-screen chart view. You can then select different time frames along the bottom or top menu to view the stock’s performance. How can I get started? EVEN if you’re on a modest salary and only have a small amount to set aside each month, you can still invest. Some companies will let you invest with as little as £1 – which can still grow into a big return. Your first step to start investing is to open an investment account. You can choose between opening a Stocks and Shares ISA or a General Investment Account (GIA). Most people should open a Stocks and Shares ISA because you won’t pay tax on any investment growth, dividends and capital gains you make. You can put in a maximum of £20,000 into one or more ISAs every tax year. There are loads of different providers offering platforms where you can set up an ISA. Look out for how much each platform charges – Trading 212 and InvestEngine both offer fee-free investment accounts. Check the provider offers the stocks and funds you’re interested in investing in. Once you’ve opened your account, you can decide how much you’d like to put in. Choose something that feels affordable, such as £20 to £30 a month. Time in the market is better than timing the market. Meanwhile, the longer you are invested the more time you have to benefit from compounding. This is when you earn a return on your original investment and on the returns you have already made. Look for a 200-day moving average or 200-day SMA. You can also view these averages by logging into your online account. Beware – a share sitting well below its 200-day moving average may be a sign of a company in real trouble, rather than a bargain. The trick is finding quality firms hovering around the average. We’ve asked experts for three well-known stocks that are trading close to their 200-day average right now that you could invest in. Hollywood Bowl – bet on bowling The Hollywood Bowl is trading just above its 200-day average Credit: Alamy Hollywood Bowl, the UK’s biggest ten-pin bowling operator with around 75 locations, is trading at 290p, which is just above its 200-day moving average of 269.72p. Although it is trading slightly above its moving average, Dan Coatsworth of investment platform AJ Bell believes the business could be a worthwhile investment. If you had already invested in the company then the high moving average would mean that you would be looking to sell your investment. “Hollywood Bowl has been incredibly successful,” he says. “Landlords with big retail sites know that a well-invested bowling alley brings in the crowds, so they offer them amazing deals and even help fund the fit-out of its sites.” Even as families tighten their belts due to the higher cost of living, Dan reckons bowling will continue to be popular. It also pays a dividend of around 5%. This means that the company pays out an annual lump sum to its shareholders that is equal to 5% of its current share price. For example, if a stock costs £100 a share then you would get £5 a year in dividends. If you had invested £20 a month in Hollywood Bowl shares for the past four years then you would have roughly £1,047 today, according to Finder. Meanwhile, if you had invested the same amount for eight years then you would have roughly £2,362 today. Don’t expect the stock to jump overnight, Dan adds. “This is a classic get-rich-slow stock,” he said. “You tuck it away and check in from time to time to see everything’s alright. It’s not about trying to time the market.” Kingfisher – invest in Britain’s builders Kingfisher could be a good bet as house builders could be set to boom Credit: Alamy The FTSE 100 owner of B&Q and Screwfix is currently sitting at 318p, which is just above its 200-day average of 305.9p. The FTSE 100 is an index that tracks the hundred largest companies that are listed on the London Stock Exchange. While Dan notes that this stock has more risk attached, the upside is that Kingfisher wins whichever way Brits choose to do their DIY. “If people want someone else to do it for them, Kingfisher benefits because it’s doing more trade sales,” he says. “If people want to do it themselves, it should still benefit.” Meanwhile, the new prime minister could come up with new policies to drive the housing market, which could boost returns, he said. One catch is the group’s European empire, including its French DIY chains. “Consistently it’s one part of this business that always seems to be holding it back,” he warns. “I would say this is a much higher-risk investment to consider.” If you had started investing £20 a month in Kingfisher four years ago then you would have £1,138 today. Meanwhile, if you had invested the same amount for eight years then you would have £2,318 today. McDonald’s: the fast food giant that could bounce back McDonald’s often bounces back after slipping below its 200-day moving average Credit: Alamy Those looking to invest in the US should consider McDonald’s, which is trading at $270.64 (£200.43) after it slipped below its 200-day moving average in April. Its 200 day moving average is currently $300.50 (£222.54). Ong says the fast food chain regularly recovers from such dips. Looking at the longer-term weekly chart, she notes the stock never stays below its 200-day line for long. She said: “This is a stock that doesn’t really come down. It might get beaten down, but then it moves back up again – even when it touches the line, it doesn’t stay there.” Meanwhile, Angeline likes that the company has repriced its cheaper items to drive business. If you had started to invest £20 a month into McDonald’s four years ago then you would have £860 today. Meanwhile, if you had invested the same amount for eight years you would have £2,075 today. Just remember that owning shares in US companies exposes you to swings in the dollar as well as in the stock price itself. This is because the stock price reflects how a business is performing but if you invest in a company that is listed in another country then the exchange rate between the dollar and the pound can also fluctuate. If the value of the dollar increases against the pound then you’ll get less money back on your investment.