Using a method called bottom fishing, investors look for stocks that have been badly beaten down, usually through a sudden and sharp drop in price. Such investors may actually be value investors searching for stocks that have fallen to attractive prices. In other cases, they may simply be investors buying the stock in anticipation of a short-lived price rally that often occurs after a steep sell-off. Regardless of the reason, however, bottom fishing is somewhat risky because there's usually a cause behind a stock's dramatic fall. The prudent investor will attempt to determine what that basis is and if it seems temporary or more long-term.

Some shareholders reinvest the dividends they receive into the companies that pay them out. This can be quite profitable due to the effect of compounding interest. Additionally, using this method, all of the components of the investment �the stock's price, the number of shares held, and sometimes even the dividend itself �tend to increase over time. Needless to say, the longer that this strategy is followed the greater the effect it's likely to have. And because dividends are paid on a regular basis, reinvesting them also serves as a form of dollar cost averaging.