Thanks for stopping by the only investing website on the 'net designed by working folks for working folks. As more and more companies dump their old guaranteed pension plans and move their employees into 401(k) retirement plans, it's more important now than ever to learn how to manage your own investments. Come on in and get started!
We'll show you how to get a better understanding of the markets and become a confident, competent investor. And we lay it all out for you in plain English (well, a Southern variety of English, anyway). Hey, you work hard for your money - learn how to make your money work hard for you!
Guidelines for Buying Stocks
Sooner or later it’s bound to happen. You can shake your head and deny it all you want. You can swear to the high heavens that you’d never, ever do it, but you will. You won’t tell anyone when you do it, but at some point you are going to throw caution to the wind and…buy shares of stock.
When it comes to investing, you know that we’re big believers of using index funds in our 401k or IRA’s. You know our reasons why: simplicity, diversification and low cost. For busy working folks, investing in a handful of index funds makes the job of managing their portfolios a lot easier and less time consuming.
The fact is, though, many of you will ‘stray from the plan.’ Here’s how it will happen: as you gain more knowledge of the markets, you’re going to have success; you’ll see your 401k growing based on the portfolio moves you’ve made; you’ll feel good about your progress as an investor and confident in your ability.
And then you’ll get cocky: you’ll try your hand at buying individual stocks.
Investing in individual stocks is not necessarily a bad thing – it’s just a little tougher for us working folks than using index funds. We have to consider the extra time and effort involved before we decide to add stocks to our portfolio (Jim Cramer says investors need to devote 1 hour per week per stock to managing their portfolios!).
Now, for those of you who are dead set on doing this, we’d like to share our stock-buying guidelines with you. Remember, we don’t have any fancy titles or letters behind our name – we’re not pros – but these are some guidelines we’ve developed over the years that have served us pretty well when it comes to investing in stocks. We follow them in this order:
1. KNOW THE CURRENT MAJOR MARKET TREND
(70% of all stocks follow the major trend, so don’t ‘swim against the tide’)
2. KNOW THE SECTOR’S CURRENT TREND
( not all sectors participate in every bull market – some are ‘laggards’)
3. MAKE SURE THE STOCK’S AVERAGE DAILY VOLUME IS 1 MILLION OR MORE
(more buyers & sellers mean easy entry/exit)
4. DON’T BUY STOCKS PRICED UNDER $10 A SHARE
(there’s usually a reason cheap stocks are priced cheap!)
5. KEEP INDIVIDUAL POSITION SIZE TO 5% OR LESS OF PORTFOLIO
(remember asset allocation always!)
6. BUILD THE POSITION GRADUALLY
( if you want 100 shares, buy 40 to start with – add more as the stock rises)
7. HAVE AN ENTRY/EXIT PLAN AND STICK TO IT
(use your charts to know when to get in & when to get out!)
As you can see, investing in individual stocks is a bit more complicated than index funds. Consider these guidelines as well as researching others if you decide to stray from index funds. It’s bound to happen.
NEWS YOU CAN USE
"This Robo-Advisor Want to Lend You Money,
Not Just Manage It"
"Is There any Saving the
"Pimco Income Expands to Largest
Active Bond Mutual Fund"
"BlackRock Cuts Fees & Jobs as
Stock Picking Goes High-tech"
"Hedge Fund Closures Rise"
from Institutional Investor
VIEWS YOU CAN USE
"6 Tips for Investors to Overcome Behavioral Bias"
from US News & World Report
"A Better Way to Invest in Index Funds"
"Who Has the Cheapest Funds?
It's More Complicated than You Think!"
"There's a Recurring Psychological Pattern
in the Stock Market"
from Yahoo! Finance
"Top 4 Alternative Investments to the Stock Market"
Spring Reading List
'Tis the season for new beginnings! Plant some seeds of knowledge with any of these fine investing books, then reap what you sow!!
Get smart about your money!!!
>>>>> And just so you know:
Clicking on these book images takes you to Amazon.com via our affiliate link. You won't pay a penny more for what you buy, but we do get a few coins for sending you there - and that helps us cover the costs of keeping our website running free!
Here are a couple of very simple retirement calculators courtesy of our friends over at Calculator Pro.
Here are the figures we used:
> Required Annual Income: we put in what we're making now (we don't buy into that "plan to spend 70% of your working income in retirement" idea!)
> Years until Retirement: we shot for age 65, but who really knows, right?
> Years after Retirement: we sure hope to have 20 good years of doing what we want to do!
> Annual Inflation: we used 3.5% (maybe go a tad higher to be safe?)
> Annual Return on Balance: we used 7% (maybe go a tad lower to be safe?)