Is the market rebounding? The Dow, leveling out each week becauseit gets a rise in the market one day and a pullback the next day,comes from investors' taking their profits. This will probablycontinue for a year or so until the really large investors suchas Hedge Fund Managers, Institutional Investors like Mutual Fundand 401(k) managers start purchasing the really great stocks atlower prices for the longer term.
You might start looking for those investments that might be agreat buy and start to determine your strategies for owning newmutual funds or stocks. You may have a deeply hidden desire toown stock in a company like this 64 year old client never reallyinterested in investing any money for his future. I guess no onehad explained that you could put any investment into your Roth ortraditional IRA or after-tax investments. When he heard this hesaid, in a very mild mannered voice, "Could I own stock inHarley-Davidson?"
Being prudent and fiscally responsible we discussed what moneywould be used, how to choose an investment, and what exitstrategies we were going to devise for his portfolio.
Step 1. Review of your finances. Have you determined that you dohave discretionary income that could be used to invest? While wewill discuss strategies for choosing stock and discuss when youwill get out of the investment, the money will be at risk ifinvesting is a choice you make. It is very important to recognizethat there is a danger of loss in any investment.
Choosing a stock could be as simple as the client above stated,knowing about a company and wanting to own shares or you may wantto do your own research into stocks of various companies orsectors. While you are looking at your stock choice you will wantto read some of the newsworthy items regarding the business orsector itself. Identify problems that may have been causing thestock price to fall or to rise. Look at merger information, readthe annual report of the company you are considering.
Step 2. Start to follow the stock price in the paper or online.Start to form a list of those items that may be important to youabout the stock, itself. Does it pay dividends? How did the stockperform in the last period of 2000-2008? What is there about thestock that you like? Find worrisome? Has the stock beenrepurchased by the company recently, and why? What is the currentprice, etc.?
The newspaper will give you a variety of information about thecompany you are choosing. Compare it to other companies. Makesure you understand terminology or importance of concepts used todescribe the stocks such as selling on large volume, 200 daymoving average, etc. Go on-line or discuss the information withyour advisor.
Step 3. Determine an exit strategy. Exit strategies are veryimportant when deciding to own or purchase stocks. You must havea plan for buying and selling your stock. In years past investorsused a buy and hold strategy that kept them tied to theirinvestment for the long term, many years. Investing today isbased on exit strategies.
Step 4. Choose an Exchange Traded Fund (ETF) or stock, decide thepercentage of profit you will make before you sell it, and thensell it. Some investors think 8% over your purchase price, others10%. But having a plan is essential. Buy and hold is not as clearan option as it once was.
You may want to choose to sell the stock if it is not growingafter 3-6 months. Instead of keeping the investment for the longterm, sell it, buy something else you have researched that doeshave better growth potential. Investors are selling to get backtheir profits and it may be what is hindering the growth of yourinvestment.
Step 5. Look at opportunities to protect your profits with astop/loss. A Stop/loss strategy will allow you to protect yourprofit by placing a stop(sell) to prevent a loss on yourinvestment. You could further, protect profits by continuing tomove the stop/loss upwards as your profits increase, alwaysstaying about 2-3% below the current price. If the stock beginsto fall and hits your stop/loss price, it will automatically besold. Meanwhile, look for the next stock to invest your profits.
Written By: Irene A. MajchrzakCopyright: 2009Contact Email: mailto:irene.majchrzak@...
Irene A. Majchrzak helps people retire debt-free with a senseof well-being and the freedom to have the things they want.Get her free ebook, Debt Free to Retire, by going to http://debtfreetoretire.com
circualted by www.esyideas.info
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