Thursday, April 23, 2009
A Stock Market investment checklist from Adam Mesh
Stock Market Checklist:
1.) Make sure you are aware of how your portfolio is
performing. Even if you have put your trust into someone
else's hands, you must know how to track how you are doing.
After all, it is your money and there is nobody that cares
more about it than you do.
The following is an excerpt from Walter Updegrave's recent
CNNMoney article:
"Does your adviser provide regular updates on how you're
doing?
No strategy is going to go exactly according to plan. So your
adviser should be providing periodic reports - quarterly
seems reasonable to me - that show you how you're doing
versus an appropriate benchmark. If your portfolio's
performance is out of line - either above or below its
benchmark - then your adviser should explain why this is the
case and you should both discuss whether any changes or
tweaks are needed.
A good adviser should also know, however, that market turmoil
will naturally upset many investors and lead them to wonder
whether they're still on the right course. So aside from
scheduled updates, an adviser should make a special effort to
keep in touch during especially chaotic periods.
It's not enough at times like this for an adviser to say,
"hang in there and all will be well." An adviser should be
ready to go over the strategy again, make sure it's still
appropriate for your situation and, most important, explain
to you why the strategy still applies even if it's losing
money at the moment.
If something about your situation has changed or if it turns
out you drastically overestimated the level of volatility you
can stomach, then it could make sense to fine tune and
perhaps re-jigger your portfolio. Remember, though, if you're
constantly making changes, then you probably don't have a
real strategy anyway. You're winging it.
If, after asking yourself these questions, you decide your
adviser comes up short, then fine, go look for a new one. But
if you're going to jettison him because he can't predict the
future, good luck in your search for a replacement, because I
don't think you'll find anyone who'll measure up."
2.) Don't anticipate what is going to happen next in the
stock market, just try to be the first to react when things
do start happening. Here's the analogy: pretend you are a
goalkeeper in a soccer tournament and the other team has a
penalty kick. If you dive before the ball is kicked then you
have a fifty-fifty chance of guessing right. Those are not
good odds when it comes to making a trade in the stock
market. If you react as soon as the ball is kicked you have a
much better chance of picking the right direction and even if
you are wrong, you still will not be as wrong. The key to
stock market success is taking advantage of what the market
gives you instead of trying to predict what is going to
happen.
At Berkshire Hathaway Inc.'s annual meeting, Warren Buffett
was asked to expand on his outlook for the stock market and
he replied, "I'd like to expand but I couldn't answer. It's
just not our game."
3.) Remain Disciplined. When trading at any level, you must
have the discipline to remove emotions from your decision
making process. Trades should be executed based on
risk/reward and sound technical analysis. If the last thought
you have before buying or selling a stock contains one of
these words: hope, afraid, want, fear, need - then you are
doing something wrong. Have the discipline to do the right
thing whether it's comfortable or not.
4.) Be consistent. If you know you have the right strategy
and you are trading the correct way then don't be fazed by
small losses. Stick with the game and plan and know that over
time you will be rewarded for your consistency. If A-Rod
strikes out three times in a row, he does not change his
entire swing. He doesn't even change his bat. He knows that
if he sticks with what's proven to be successful over time
then the hits will come his way. It's okay to tweak and
constantly be looking to improve but not change everything
because of a few minor setbacks. Boring Consistency will lead
to success. If it helps, find someone to hold you accountable
to make sure you follow through.
5.) Form a plan. You need to have a base, a core strategy that
you can rely on and work off of. Success starts with a plan.
Take a system that works, now customize it for you and your
lifestyle. Set goals that you have to stretch to reach and
make sure the plan you have will give you the best possible
chance to achieve those goals.
If you need help with #'s 4 & 5 then click on the link below.
My team and I will make sure you are held accountable. We
will also customize a stock market plan that is based on you
- your personality, your availability and your goals.
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