The first top 10
Stock investment is a roller-coaster ride which can bring significant returns or can bring devastating losses, if managed incorrectly. Dental & Medical Financial Services have summarised 20 suggestions (in a 2-part series) to help make your journey of stock investment a little smoother.
This does not constitute advice and advice should be sought in all instances before acting on it. Please remember that whilst past performance is a good indicator, it can not be relied on wholly.
(1) Keep things simple
It pays in stock investment to keep things simple. Too many times have investors wanted to run before they can walk, and choose stocks and shares from businesses that are too complex in nature for their level of the game.
Typically, by choosing investments based on robust, solid past performance trends, along with not trading too often can help to keep things simple and aid the chances of success.
(2) Manage your expectations
Although some people do strike it lucky, more often than not, stock investment isn’t a “get rich quick” strategy. Typically, high returns are achieved by taking a high risks up-front, something you may or may not be willing to do.
Managing your own expectations and understanding your attitude to risk is vital in stock investment.
(3) Patience is a virtue
Stock markets are volatile, particularly in the short-term and trying to predict trends becomes virtually impossible unless looking longer term.
An element of patience is required with stock market investment and it is helpful to not get frustrated with share growth. In time the market will evaluate and recognise the true worth of a business shares, but this could take a while.
(4) Don’t believe all the noise
It helps to remember that the media report on every fluctuation from stocks to currency to oil prices and everything else. Firstly, not all of these will have a direct impact on your own stock selection and just draws focus away from where you need to concentrate your energy.
These fluctuations also really just represent market volatility and won’t necessarily affect the actual value of an investment.
(5) Show an interest in your “interest”
When buying stocks and shares, it means you will own an “interest” in a company. However big or small that interest may be, it is important to act like a business owner and assess the performance by reading financial statements and reports and generally “showing an interest in your interest”.
(6) Buy low and sell high
Sounds an obvious one but lots of investors decide to buy stocks on the back of a recent rise. Whilst it is good to get it on the upwards curve, if a price is already peaking, an investment can just end up being a bad deal. Similarly some investors get greedy and want to cash-in when a stock just starts to gain momentum, rather than hanging on for the right point of sale.
The bottom line is aim to buy when stocks are at their lowest and sell when they are at their highest.
(7) Don’t focus just on price
Many investors will base all future decisions purely on the price they paid for stock and will compare any progress against solely this.
It is good to remember that price is a historical data point and will have been weighted based on variables at the time. Other factors should come into play when tracking progress and deciding if now is the time to sell.
(8) Economics is king
When deciding on which “horse to back” so to speak, it is best to put your bets on the horse, than the jockey. In other words, the economics of the business is a better bet than the management, as this can change from time to time and sometimes for the worse.
When choosing an investment make sure the economics are solid.
(9) Take care of bad management practice
Even though opting for mediocre management in a company is a better choice than opting for mediocre economics, if management practice is just not in line with good policy, then it is a good idea to act with caution.
(10) History often repeats itself
Past performance is no guarantee of future results however when it comes to investment, it is pretty much the most reliable thing to focus on. If an investment manager or a company manager has a good track record, it is likely they will continue along this thread, meaning that you can feel confident sticking to companies and individuals who have demonstrated their potential.
Dental & Medical Financial Services can help with navigating stock market investment. We will publish another 10 top stock investment tips next month so stay connected.
Tel: 01403 780 770