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Five Steps to Successful
Stock Investing
Irrespective of the current state of our economy, the key to successful
investing in the stock market is always patience. Investors should invest
with a long term approach. This means you should be thinking three to five
years ahead. Assuming that you already have your debts (especially credit
cards) under control, your investment strategy should encompass these five
simple steps.
The first step is to assess your individual situation, set personal goals
and monitor the progress. Too often new investors jump into the market
just because they have been told it is the right thing to do. No one should
invest their hard earned money into anything until they understand the
specifics of their own personal situation. You should have specific goals
and you should monitor the results. Would you be happy with 20% growth in
your portfolio for a given 12-month period? Maybe you should be, but if I
told you that during that market the S&P 500 was up 40% would you still be
happy. You must also assess the type of growth you will need in a specific
timeframe to reach goals such as retirement or sending children to college.
Second, you must determine what types of companies in which you want to
invest. Investors should carefully research the stocks they buy.
After stock purchase, more research is necessary to determine if and when to
sell, or buy more of the same stock. If you are unwilling or unable to do
the necessary research, you should consider Index Funds.
Investors must learn to speak the language of the company. If
investors are going to have an effective dialogue it is up to them to learn
and understand the terminology associated with investing. This is achieved
by reviewing the company’s financial statements.
Once the company’s financial history and goals have been reviewed, the
investor must decide whether the company’s execution and outlook match
the investor’s risk tolerance, interests and area of expertise. Again,
as long as you own the stock you will need to time and energy understanding
the progress of the company vis-à-vis its stated objectives.
The final step is when the investor buys or sells the company’s stock
based on their knowledge of the company and themselves. Although this
step (“Buy What You Know”) is identified as the first step by many financial
advisors, by making this the final step investors have put themselves in a
very strategic position of having a better understanding of themselves and
the company’s Income Statement, Balance Sheet and Cash Flow Statement. As a
result, the investor will have more realistic expectations and a better
likelihood of success.
Ooh-Wee.com is a Houston, Texas based company that provides investment
education online. Ooh-wee.com provides its members with a unique, web-based
stock selection tool that will help investors through this entire process.
by
Harold Flowers - knowledge@ooh-wee.com |