Investment Strategy 101 for the Newbie Investor

 Stock picking is in many ways similar to choosing a spouse. If you have a lot of money, your options are countless. If you have no money, then you may not have to bother and everyone will understand your position. For many people, their money situation lies somewhere in between the two extremes.

In this article I will assume you are a first time investor with very little investment knowledge but with a big desire to succeed and a lot of hope and confidence

Inorder to pick the most suitable stock, you only need to follow 3 simple steps.

Step 1 - LIST. Make a list of prospective stocks by listing 10 companies that you know to be successful and which you believe have a promising future.

How? Examine your lifestyle and look at the products and services that you pay for repeatedly. This means that you like the products and you believe in the companies that make them. For example if you regularly eat the big Mac, you shave with Gillette blades and drink Coca Cola, then put McDonalds, Gillette and Coca Cola on the list. You do not have to go with these obvious examples. Examine your expenses and you will see many more public companies that you spend your money on.

Why? Investing is about taking a step of faith. You are more likely to take my advice if you generate a list of companies that you are familiar with and those that have earned your trust

Step 2 - WEED. Examine the list and weed out the stocks that are not great candidates at this time.

How? Remove from your list all companies with stock prices less than $50. Google the companies in the revised list for expert reviews and remove a company if at least 2 investment experts indicate negative future performance or possibility of negative news regarding the company.

Why? If a company has a price above $50, it means the public already has considerable confidence in the future success of the company. Negative news and performance generally will adversely affect the short term price of a stock. You should not invest in a stock that is likely to lose value as soon as you buy it.

Step 3 - PICK. . Choose the stock with the best of the following 3 aspects. Highest price, Best expert reviews and Most consistent price growth over the last 3 years. The following statement is the most important thing about this whole investment strategy. If you forget everything else, please remember this one statement.

When? Invest in the chosen stock when and only when you notice that a large investor has started to buy this stock. Sell this stock on the day you notice that a large investor is selling this stock.

How? You can track stock price and investor performance on websites that provide free charts on publicly traded stocks e.g. bigcharts.com and stockcharts.com . You can buy the stock you choose using websites such as Scottrade.com, etrade.com,

Why? Large investors such as mutual funds buy and sell stocks in large quantities worth millions of dollars. This means they cannot sell or buy the stock they want in one transaction. They normally take more than a week to buy or sell stocks. If you examine the volume and price chart of a particular stock, you can be able to tell when a large investor is buying or selling. Since price is determined by the economics law of supply and demand, when a large investor is buying the stock the demand is high and the price will increase. When a large investor is selling a stock, the supply is high and the price will fall.

If you find this information helpful, or if you have something to ask or add, please let me know by writing your comment.

You can also read my other article on Ten Things To Know Before You Invest at http://hubpages.com/hub/Ten-Things-To-Know-Before-You-Invest.

 

The most important things for a newbie marketer are the following;

1- FREE, FREE, FREE. Where do you get business ideas, tools and information for FREE. Most newbies do not have much money to risk. The good thing is that the internet is full of FREE stuff. If you have time on your hands then you can always search and find a low cost solution for almost any problem.

2- SYSTEM, SYSTEM, SYSTEM. There are millions of ways to make money on the internet. Some are simple, others are complex and many need alot of information and experience. The best question to ask yourself before you embark on any venture is whether you fully understand how the SYSTEM works all the way from product selection to receiving money in your bank account. If you don't understand the system you will get frustrated and lose interest in the business.

3- INFORMATION, INFORMATION, INFORMATION. Birds of a feather flock together. Join at least 2 internet marketing forums and blogs and participate consistently for at least 2 hours every week. Within 6 months you will have acquired enough information to fine tune your business and branch out to something more suitable to your ability and taste. The advantage of a forum is that participants have a common purpose and you will benefit from questions posed by other newbies and answered by experienced marketers. Join the free blogs and forums at first.

When you start making money then it is time to pay to become an apprentice to one of the I.M. gurus. The gurus will teach you the secrets of catapulting your business to the $100,000 a year range but be prepared to pay for most of the tools. The good thing is that by this time you will cease to be a newbie and you will be able to make better cost-benefit decisions for the business.

Read the article "How I made my first internet marketing sale" at http://hubpages.com/hub/How-I-Made-My-First-Internet-Marketing-Sale

This article offers a simple step by step guide on how you can make your first sale.

Every one loves to be admired and every one loves to be considered smart. Research shows that we tend to overrate our abilities. The same is true for your banker. So next time you consider applying for a business loan try this strategy that appeals to your bankers sense of importance.

Step 1 – Prepare a good business plan. Ensure you clearly show the expected financing required, revenues, related expenditure and expected net income on a summary page. Prepare two scenarios, worst case and reasonably good. Have the two plans professionally prepared and bound. Hide the worst case plan and only show it if someone twists your arm.

Step 2 – Go to a credit union and ask to see the senior loans manager. Asking for a senior officer makes people take you seriously. You also want to get to someone senior who has some leeway in making decisions.

Step 3 – Tell the loans manager that you have been thinking about something for a long while and before you make final decisions you have decided to SEEK HIS ADVICE. Place the plan in front of him and let him browse through before you explain what the plan is all about. We all hate desperate people, look confident and thoughtful. Do not mention the word loan or look eager to discuss the financing part. Give a neutral facial expression and let him be the first to mention loan or financing.

Step 4 – When the loans manager mentions possible financing terms, it is time to do the opposite of how Regular Joe would react. Grab the plan and tell him that you need a week to think about it. Thank him very much, promise to get back to him and leave the office.  

Step 5 – Go to your regular bank and explain to them that the credit union is ready to finance your plan but you are wondering if they could beat the credit union by offering a better deal. 

Step 6 – Go back to the credit union loans manager as promised on the seventh day and tell him you bumped into your regular banker and he offered you a reasonably good deal. He will ask to see the bank deal so make sure you have something on paper.  

Step 7 – Negotiate a good deal with the credit union manager. The issue this time round is not whether you will get a loan or not, but how the deal will be structured. 

Try this strategy and let us know your feedback.

Donald Trump the famous billionaire attended a seminar and afterwards while seated in the lounge, a cell phone rang. One of the seminar presenters reached into his pocket and answered the call. Afterwards, Donald Trump approached the presenter and told him that it was clear he wasn't making enough money. The presenter protested. He admitted he wasn't a billionaire but he sure had more wealth than any regular Joe.  Donald Trump repeated, "If you had enough money you wouldn't answer your own phone." 

According to SmartMoney.com article by Daren Fonda, there are 10 things that millionaires won't tell you. Among them is that using other people's resources helps them belong in the millionaire's club. 

Millionaires use OPM – Other People's Money. Virtually all of them borrowed to invest in their businesses and professions.  

Millionaires use OPE – Other People's Expertise. They surround themselves with financial advisors, lawyers, personal assistants, concierge etc. 

Millionaires use OPT – Other People's Time. They delegate boring and routine tasks and engage in tasks which they enjoy and those they are good at.   

Now contrast the above with the habits and attitudes of Regular Joe.  

Regular Joe thinks it is too risky to borrow money for large investments with huge income potential but easily acquires consumer credit card debt with the highest interest rates. 

Regular Joe thinks he knows everything and overrates his ability. Consequently he rarely seeks expert help and prefers to rely on uninformed friends, relatives and hearsay. When failure ultimately catches up with him, he finds a scapegoat, passes the buck and ignores the log in his own eye. 

Regular Joe thinks he has the magical ability to expand time. He therefore prides himself in being a jack of all trades and consequently becomes a master of none. He loathes relinquishing control and assumes his mode of operation and way of seeing things is the best. 

I wish you Godspeed to the day you will afford to pay somebody else to answer your cellphone.
 

Quote: People experience their day very differently when they have a lot of money. Betsey Stevenson.

The world of personal finance seems very simple at a glance, yet it is very complicated. However, most people are not able to differentiate the simple from the complex. The goods news is that you can easily get someone who understands the complexity and is able to plan your finances. The small problem is – he costs money. Is it worth it to spend money on a Personal Financial Advisor? 

Let us start with the simple stuff which everyone understands. To become financially successful you need to do 3 simple things as a minimum.
1)      Save regularly
2)      Invest wisely
3)      Spend less than you earn


Complexity arises when you consider the myriad tools of finance designed to help you do the simple stuff and the legal and taxation effects of each tool. 

For example, how well do you understand the following?

1)      Investment – Portfolio diversification, Asset allocation and Re-balancing
2)      Insurance – How to use insurance as an investment tool
3)      Estate Planning – How to protect your wealth from personal lawsuits, inheritance wars and avoidable  taxes

If you wish to pursue wealth building on your own, you need to answer the following 3 questions regarding your Knowledge, Time and Desire. 


Knowledge – Do you wish to learn about Money Market Instruments, Fixed-Income Capital Market, Equity Securities, Equity Derivatives, Investment Companies etc, budgets, retirement plans, estate planning, insurance, taxation, personal liabilities and more?

Time – In addition to your regular job, family, hobbies and friends, can you spare at least 10 hours a week, every week, to study the financial market in relation to your wealth building plan? 

Desire – Do you seriously consider finance to be so interesting that you can pursue it for the rest of your life?

If you answered yes to all three then probably paying a financial advisor is a total waste of money. Otherwise, you will be penny wise and pound foolish.

Well, before you consider hiring a financial advisor, you need to put your house in order first. Pay off all credit card debt, maximize contributions to your 401K and roth IRA and have at least 3 months income saved.


Quote: a lawyer who represents himself has a fool for a client.

Read the latest Personal Finance article number 8 and discover the system i used to make my first internet marketing sale by CLICKING HERE.

One of the most common reasons why people cannot sleep restfully throughout the night is because of money. Well, actually, the lack of it.

Some people are working grave yard shifts to make ends meet while some are too poor to afford a decent bed in a quiet bed room in a safe neighborhood. Others are worried about business deals that have gone sour while some are crying over spilt milk when they remember missed golden opportunities.

On the other end of the scale are people unable to catch a wink because they think someone will steal their loot. While some people have acquired enough wealth and do not think about the things that money can buy, they still cannot rest well enough at night because they are not the richest at the golf club.

Whatever the reason, may be it is good question to know how much money will guarantee you a good night's sleep anywhere in the world.

A survey was conducted in 2008 among millionaires to determine at what level of wealth someone would be able to sleep soundly at night, in comfort and luxury, without thinking about money or what money will buy.

THE NUMBER IS 23 MILLION DOLLARS.

All the millionaires surveyed who were worth 23 million dollars and above stayed awake at night for other reasons but not money.

How do you measure up to this number?

Quote: You are only limited but your own imagination.

The Pareto Principle, also known as the 80-20 rule, was named after an Italian Economist, Vilfredo Pareto. Pareto observed that 80% of the wealth in Italy was owned by 20% of the population. Since then, very many observations have been seen to follow the 80-20 rule and Pareto's Principle has been used by the United Nations, Microsoft and other international giants. It is commonly stated that 80% of the effects come from 20% of the causes.

The principle follows from the fact that life does not distribute things evenly. Therefore, the way you allocate time, resources and effort has a pareto principle effect. For example:

1.  80% of your happiness comes from 20% of your activities

2. If you have a business, 80% of your profit will be generated from 20% of your customers. Also 80% of your complaints/calls will come from 20% of your customers

3. 80% of your telephone calls are to 20% of the numbers in your phone book.

The big lesson today is the realization that you only need to focus on the critical 20% that matter. You can therefore afford to ignore the trivial 80% and yet achieve 80% satisfaction.

Let me explain this in a simple way. Each day when you have to make decisions on what not to do, make sure you at least do the critical 20%. What this means is that you should identify the critical activities (20%) that produce the most value and focus on these.

What about the other 80% made of trivial activities? You can delegate these activities or automate them or delete them - they won't affect you much.

Homework.

1. Analyse the 20% critical activities that affect your personal finances. For example if you want to reduce your monthly expenditure, start by identifying the 20% expense items that contribute 80% of the total expenditure. Then work on trimming these expenses and you will see a big impact o

2. If your phone book is full, which numbers can you afford to delete with minimal regret? Send your answer to [email protected] and receive a surprise gift.

I am sure you were once introduced to a milionaire who appeared smart, sharp and admirable - before he spoke. After listening to him for a while and catching up on some gossip about him, the same millionaire lost his glamour and you wondered aloud to yourself, "Why is this idiot rich and i am not?"

If wealth had a simple, direct and obvious relationship to the level of intelligence (IQ), then every professor would be a millionaire and every idiot would be writhing in poverty.

How come some people like you who are good by nature, well-bred, never missed a day in school, and very hardworking are struggling pay-check to pay- check? How come some people who do not have manners, never attended afternoon classes and are ignorant of classical theories and national history revel in so much wealth?

Below I quote Charles Revson the founder of REVLON, a billion dollar health and beauty company.

"Look kiddie. I built this business by being a bastard. I run it by being a bastard. I'll always be a bastard, and don't you ever try to change me." — Charles Revson, founder of Revlon, to a senior executive within his company.

If you want to know some of the reasons wealth and riches have been dodging you lately, then read Robert Shemin's book, "Why is this idiot rich and i am not?"
This is our recommended book for October.

Story

Last week a close friend of mine narrated to me an incident which happened in his home, that I will gladly share with his permission.

Barrack Obama and John McCain had just finished their 90-minute presidential debate and political analysts were quick to go on air to dissect the debate and showcase their political acumen.

My friend Joe (not his real name) was closely following the analysis unfold as he lay horizontal on his favorite couch. His eyes were glued to the television set and his habitual 9p.m. cup of coffee was still cold and untouched. It lay on the coffee table like a deserted friend. His cell-phone was conveniently tucked beneath the cushions - he did not have the time to put it on vibration mode.

Joe was confident nothing in the world would interrupt him. His kids were asleep rehearsing their childish plays in dreamland. His wife was somewhere within the house - it did not matter where. 

Just then he noticed from the corner of his eye a shadowy figure float into the room. It settled right next to him, but he paid no attention. The political analysis required 100% of his attention. How else would he get enough material to boast about his political sharpness in the office the following morning?

Without notice and almost robotically, the shadowy figure slowly extended a limb and he felt the warmth of clammy fingers caressing his hairy chest. Startled and annoyed, Joe stared menacingly at the shadowy figure. Without thinking he blurted out, “Honey, please wait for the weather!” And he continued to listen to the news.

The shadowy figure was his dear wife. She coyly retreated and immediately disappeared into a dark and lonely bedroom.

Seconds later, the truth of his actions hit him like a brick. He immediately realized he had sacrificed the endless love of his wife and the friendship of ten years for a piece of news that will be repeated a hundred times on CNN. With a heart full of guilt, Joe reached for the red button on his remote control. He turned off the television and every light in the house. Then he picked enough courage to follow his wife to their pitch dark bedroom.

Lesson

Are there times in your financial life that you have sacrificed something very important so that you could have immediate gratification from something very unimportant? Like spending $200 a month on coffee and ignoring to insure your life with $300,000 for only $40 a month?

End.

Written for www.MyMoneyTips.Weebly.com by George Chege