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STRATEGIC INVESTING
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INVESTING |
Step 1
Scan for industries that you think will have long term potential for growth. Think of political, economic and social trends. Companies belonging to e-commerce, fintech, digital advertising, digital payments, green industries, and remote work can be your primary candidates.
Cyclical companies or those that follow the general economic trend can also be something to look out for, especially now that economics are expected to recover in the next few years. Examples of these stocks are banking stocks, property, construction, restaurants, tourism, airline, car manufacturers, and discretionary items such as high-end clothing retailers.
Step 2
Check their intrinsic value by comparing their PE and PB ratio with their peers in the same industry. Are they considered cheap compared with their peers? the lower, the better.
Check their Quick and current ratio and see if they are in too much debt, especially after this pandemic. Stay away from those with too much debt. As always, check how they fare compared with their peers in the same industry. The higher the current ration, the better.
Check the management of the company with the return on equity ratio. Are the assets of the company fully utilized?
In short, choose a company with good fundamentals - growing sales and earnings, with low debt.
Read This Also: - Dividend Growth Investing Strategy
Step 3
If the stock is on a downtrend, check the news and see if there is anything that may cause this. Check your local stockbroker research and investment guide to see if it is a BUY for them. Is it below the current price? if yes, that's a good sign. Check other reputable stock market recommendation sources and see if it is a BUY for them.
The whole purpose of step 3 is to ensure you are not missing out on any significant news and that full-time analysts share your views. If news negatively impacts the company, these research and investment guides will reflect it in their recommendations.
Step 4
Perform technical analysis (Strategies 4-7) to determine the perfect time to buy the stock. All stock prices follow a cycle - up, take a breather, go down, then back up again. According to what the charts say, wait, for a good time to enter the market.
Read More: - 5 Mistakes to avoid as a Investor.
Step 5
Do not go all in all at once. Have a specific time interval to invest OR wait for the chart to give you a good buying signal again before you increase your position. If you go all in, you will be filled with emotions that impede your judgment and let you deviate from the plan. This is the most common reason newbies lose money in the stock market. They go all in, get emotional, and sell at a loss. Be disciplined, you have done your research and follow your plan.
Step 6
Diversify, spread your risk across multiple assets but not too many that you do not feel the gains. A mix of 5 - 8 stocks are good. Divided your portfolio across multiple strategies. My portfolio includes 30% REITs and dividend stocks, 30% growth stocks, and 40% value stocks. Some of the dividends I get from REITs Ire-invest in my existing growth or value stocks, while some I lock in and invest in a high -yield saving account.
This is the process of strategic investments in the stock market. It follows fundamentals analysis to value a stock, technical analysis to value a stock, technical analysis to tell you if it is a good time to buy, then cost - averaging on how you should buy.
The next question is, when do you hold a company's share? you need to have a goal before investing. You can sell and enjoy the gains if that goal is reached. Do not hold forever. all companies have a lifetime and will eventually die out.
