The second 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.
Read our first top 10 Stock Investment Tips here.
(11) Be prepared
A business that is on the downward turn can do so quite rapidly. In the same way a business who’s growth is accelerating can exceed your expectations in a short space of time.
It is essential to keep you wits about you. If a company is cheap to invest but is generating little to no economic value, it pays to have a wide margin of safety and always be on the lookout for when is best to retract.
(12) Don’t be a bull
Patience is a virtue when it comes to investments, however there is a fine line with being patient and being stubborn.
This is another reason to watch companies, instead of watching stock prices, as if a stock falls, however the company remains stable, then patience usually pays off.
On the other hand, if you are continually presented with bad news about the company, it’s management and poor financials, and still don’t take action, this could be entering the realm of stubbornness.
Ask yourself the questions
- If I didn’t own this share, would I invest in it today?
- What is the business worth today?
(13) If it happens once…
If a surprise announcement comes your way, it is unlikely to be the last.
Be it positive or negative, there are likely to be more around the corner as things unravel.
(14) Facts are facts, but listen to your gut instinct
There is merit in being analytical with investments – after all, this is what will help you make accurate decisions using the facts at your disposal. However, the feeling inside your gut which tells you if something is right or wrong can not be ignored.
Sometimes, somethings just won’t add up, and in that case it is good to recheck your calculations, ask more questions and not proceed until you are completely happy.
(15) Recognise when things have peaked
Particularly with trend items, there will be a point when the market has saturated an investment. If a crowd promote an opportunity as a “can’t lose” then it is possible that the tables could turn very soon.
Similarly, if companies start diversifying beyond their area of expertise, it could be a sign to look for the exit door.
(16) Focus on quality investments
It sounds kind of obvious, however focusing on high quality investments, i.e. ones that will intrinsically grow in value over the medium to long term, are solid opportunities for an investor.
Even if growth is forecast to be gradual but steady, this is a better investment that playing “chicken” with the stock market by dipping in and out of many investments in the hope of a quick win.
(17) Choose value
As important as choosing quality investments, is to get the price right. When looking at pricing of shares it really comes down to value. Ask yourself, is this an appropriate price to pay?
What is the expected return? And in what timeframe? What else could you spend the money for the investment on?
(18) Think independently
Whilst it pays off to get professional advice on investments, it doesn’t usually pay to follow the crowd, especially if the crowd is your friends down the pub on a Friday night!
Often the crowd are wrong and are all following each other, so it is beneficial to think independently and go against the grain.
Seeking out solid investments independently may take a little longer, however the wait is usually worth it.
(19) Have a safety margin
Of course, it is impossible to predict the future so having a safety margin with all your investments is essential. This will protect you to some extent then if the forecasts of the investment don’t turn out exactly as planned at the time of purchase.
(20) Keep a cool head
Last but not least, investing is not always about exceptional intellect. Keeping a cool head, a positive attitude and logically buying stocks when they are low and selling when they are high, will be a good start to successful investing.
Dental & Medical Financial Services can help with navigating stock market investment. Read our first 10 top tips here.
Tel: 01403 780 770