Tag Archives: stock investing

Setting Your Money Goals

Guest Article By Robert Alan Stewart 

3 Factors which determine your investment strategy

You may be wondering what is the right investment strategy for you, but without knowing anything about you, any advice on which investments are right for you may in fact be the wrong ones. There are basically three factors that determine which are the right investments for you, they are:

1. Your age

2. Purpose for the money

3. Your risk profile

Starting with your age. It would be rather silly of you to invest all your money in growth funds if you are aged 65 because if the market takes a dive such as was the case during the 1987 sharemarket crash and to a lesser extent, the Global Financial Crisis during the early 2000s you have less time to recover from these setbacks whereas the young ones have time on their side.

The purpose for the money is the second factor.

Decide whether you require the money in the short-term, medium-term, or long-term.

Short-term would be up to a year.

Medium-term is 1-5 years

Long-term is longer than five years

Short term expenses would be, a bank account for emergencies, a holiday within a year, dental expenses, or t pay for the kids schooling for a year.

Medium-term would be savings for a car.

Long term would be your retirement fund, saving for a house deposit, or saving for the trip of a lifetime.

Your risk profile is a determining factor in where you invest your money. If the thought of the sharemarket taking a dive will give you sleepless nights then investing growth stocks in the sharemarket is not for you. A better option would be managed funds where you will be given a choice between growth, balanced, and conservative funds.

It is important not to get into debt for there is a cost to debt and that is interest. Interest adds to the cost of goods bought with borrowed money, and this adds up to a fortune during a lifetime of borrowing for consumables. This is called bad debt because the value of the item declines over time.

There is such a thing as good debt though and this is your first home because the value of the property increases during the lifetime of the loan but even this is not always a good option for some people if you live a kind of transient lifestyle.

“Everyone is to their own,” so only you know what makes you tick so your personal circumstances are the determining factors which govern where best to invest your savings.

You must do your homework before you invest in anything, whether that is the sharemarket, managed funds, or gold. There is so much information available on just about everything, and that includes finance. It is just a matter of learning the ropes and having a financial strategy which suits your personal circumstances.

Most people are able to save money but having goals and selecting the right investments for your savings can help increase your assets and enable you to reach your goals quicker. In life one size does not fit all as far as deciding where to invest your money. My site has several finance related articles, visit: http://www.robertastewart.com

Article Source: https://EzineArticles.com/expert/Robert_Alan_Stewart/2287449

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The Need for Discipline in the Stock Market

Guest Article By Dr. Winton M. Felt

Good trading rules are important. However, even those who concoct great rules tend not to follow them. Most people lack the consistency necessary to stick to those rules even when things are going badly.

Make the decision. Will you be consistent in following your rules or not? Most people who invest or trade never make the decision. It is almost impossible to be a consistent winner in the stock market without the consistent application of good decision rules. Think about how the market reacts to news events. A new jobs report is released by the government that shows more people are jobless. Immediately, the market plunges. The debt of a foreign country is downgraded and panic hits the market. Stocks plunge in many sectors. What is going on here? Just as an EKG can tell a cardiologist some things about a person’s heart function, so we can consider the market to be connected to the nervous system of millions of investors.

There is a stimulus and a response. Depending on the nature of the stimulus, the response is reasonably predictable. The market reflects emotional states of the population. In order to profit in the stock market, it is necessary to avoid thinking like the rest of the population. When the population pushes the market down in a fit of panic selling, the negative attitude about owning stocks is at a peak. However, that is precisely the time when people should be most positive about owning stocks. The individual investor tends to feel the same way the population as a whole feels. To follow a set of rules with consistency, therefore, is difficult. It often forces a person to act contrary to his emotions.

Assume, for example, that you have just bought a stock with a fantastic story. Blixis Company (BLIX) has just discovered a permanent cure for the common cold and has patent rights to the serum. The stock is at $10 a share and you note that it has been closely following a rising trendline. You buy it for $10 when it is right on the trendline. You believe this stock is likely to go to at least $100 and that it will probably split several times before it stops climbing. After a week, the stock is at $15 and it is still moving along the trendline. One day you happen to be looking at the chart of this stock and you notice that it has fallen below the trendline. It is selling at $15 but the trendline is at 15.46. What do you do? Do you say to yourself that this is only a temporary bout of profit taking and decide to continue holding? Two days later the trendline is at $17 and the stock is still at $15. Do you tell yourself that “stocks fluctuate and you must give them room to do so” or do you sell? At $15, the stock is 11.76% below the trendline.

Most investors in this situation would keep holding. However, if you are still holding, then you must face the fact that you probably do not have a strategy at all. You have bought a “story stock” and you are psychologically locked into it because you believe in its story. A strategy consisting of a set of decision rules enables a person to draw a line in the sand and say “this is where I pull the plug.” The probability of a person coming out ahead in the scenario described above, without his adhering to the dictates of a good set of decision rules, is not great. What if the FDA insists on additional data before clearing the drug? The stock would then plummet. It could take a year or more to acquire sufficient data to satisfy the FDA. What if while you are waiting another company comes up with a cure that is based on a slightly different process that will enable the company to manufacture its drug more cheaply than Blixis Company can manufacture its drug? If that were to happen, BLIX would probably plunge and you would still be holding the stock.

A consistent rule-following strategic investor times his purchase so he can buy when risk of further decline is minimal. He never becomes married to a stock. Finally, he always has an exit strategy, because unexpected bad things happen. In fact, these are the broad principles followed by stockdisciplines trader/investors. Beyond these general concepts, an investor/trader should have specific well-defined rules for buying and selling. For every buyer, there is a seller. One is more likely to make money on a transaction, and the other is more likely to lose money on the same transaction. Without strictly adhering to a sound strategy, guess which one you are most likely to be.

Copyright 2018, by Stock Disciplines, LLC. a.k.a. StockDisciplines.com

Dr. Felt has market reviews, stock alerts, and free tutorials at https://www.stockdisciplines.com Information and tools for computing stop losses are also at https://www.stockdisciplines.com

Article Source: https://EzineArticles.com/expert/Dr._Winton_M._Felt/190829

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