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Choosing an Investment
There are several criteria for choosing an investment. These criteria are that a stock investment should make money. It should have a margin of safety so that adverse events such as stock market crashes do no wipe out years of gains. Choosing an investment often has to do with diversifying a stock portfolio in order to broaden opportunity as well as to reduce investment risk. Choosing an investment in a promising new stock, even penny stock investing, opens up the prospect of the occasional “home run,” the stock market investment that multiplies a hundred fold or more in value in just a few years.
Choosing dividend stocks with histories of solid, steady stock price appreciation is relying on the power of exponential growth. An investment that grows at 14% a year, for example, will double in value in five years. With a secure investment, time is on your side as dividend checks arrive quarterly and stock price increases year after year. Investing in a company with a hundred year history of always paying dividends is not defensive investing. It is very commonly successful stock investing. Sometimes the best criteria when choosing an investment is whether or not you will be able to sleep at night.
Those who engage in long term investing will look for a margin of safety to help protect against loss. However, they will also look for growth potential. Ideally an investment will have growth potential overlooked by the stock market in general. Thus the stock price will be lower than what the company’s earnings potential should warrant. This is an ideal example of the value of fundamental analysis in stock picking. Choosing an investment in a stock with a low price to earnings ratio, for example, will often mean that the price will catch up to the earnings and the investor will profit.
Stock portfolio diversification tends to reduce the risk of loss in stock market investing. By choosing stocks in different market sectors the investor will reduce the risk of a market disaster in one sector taking down all stock values. In addition, by investing in a larger number of promising stocks the investor will increase his or her chances of picking a really big winner. For the average investor who has a full time “day job” it makes sense to hold up to half a dozen stocks. For the full time professional a larger number is possible. This simply has to do with the ability to do at least weekly fundamental and technical analysis of the stocks that one holds.
The Long term investor and the day trader need to buy, sell, or trade investments that they understand. If you don’t understand the investment don’t buy, don’t sell short, don’t’ touch it. This rule of thumb applies to technical analysis as well as the fundamentals. Traders who do not recognize a pattern in their Candlestick analysis should choose to “sit this one out.”
2. There are several criteria for choosing an
investment.
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3. These criteria are that a stock
investment should make money.
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4. It should have a margin of safety so that
adverse events such as stock market
crashes do no wipe out years of gains.
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5. Choosing an investment often has to do
with diversifying a stock portfolio in
order to broaden opportunity as well as
to reduce investment risk.
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6. Choosing an investment in a promising
new stock, even penny stock investing,
opens up the prospect of the occasional
“home run,” the stock market
investment that multiplies a hundred
fold or more in value in just a few years.
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7. Choosing dividend stocks with histories
of solid, steady stock price appreciation
is relying on the power of exponential
growth.
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8. An investment that grows at 14% a
year, for example, will double in value in
five years.
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9. With a secure investment, time is on
your side as dividend checks arrive
quarterly and stock price increases year
after year.
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10. Investing in a company with a hundred
year history of always paying dividends
is not defensive investing.
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11. It is very commonly successful stock
investing.
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12. Sometimes the best criteria when
choosing an investment is whether or
not you will be able to sleep at night.
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13. Those who engage in long term investing
will look for a margin of safety to help
protect against loss.
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14. However, they will also look for growth
potential. Ideally an investment will have
growth potential overlooked by the
stock market in general.
www.CandlestickForums.com
15. Thus the stock price will be lower than
what the company’s earnings potential
should warrant.
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16. This is an ideal example of the value of
fundamental analysis in stock picking.
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17. Choosing an investment in a stock with a
low price to earnings ratio, for
example, will often mean that the price
will catch up to the earnings and the
investor will profit.
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19. By choosing stocks in different market
sectors the investor will reduce the risk
of a market disaster in one sector taking
down all stock values.
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20. In addition, by investing in a larger
number of promising stocks the investor
will increase his or her chances of
picking a really big winner.
www.CandlestickForums.com
21. For the average investor who has a full
time “day job” it makes sense to hold up
to half a dozen stocks.
www.CandlestickForums.com
22. For the full time professional a larger
number is possible.
www.CandlestickForums.com
23. This simply has to do with the ability to
do at least weekly fundamental and
technical analysis of the stocks that one
holds.
www.CandlestickForums.com
24. The Long term investor and the day
trader need to buy, sell, or trade
investments that they understand.
www.CandlestickForums.com
25. If you don’t understand the investment
don’t buy, don’t sell short, don’t’ touch
it. This rule of thumb applies to technical
analysis as well as the fundamentals.
www.CandlestickForums.com
26. Traders who do not recognize a pattern
in their Candlestick analysis should
choose to “sit this one out.” You can
miss opportunities but you don’t lose
money by not trading or investing.
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27. As we said at the beginning, sometimes
best criteria when choosing an
investment is whether or not you will be
able to sleep at night.
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