You need a plan Where am I? Where do I want to go? How am I going to get there? What are my chances of success?
Read the following statements and think about the actions of each person…
Jack Hackett was out on a Friday night and was talking to a few mates. One of them said that he had a red hot tip. He had heard from a friend of a friend of a cousin of a stranger who overheard a conversation at a bus stop. He immediately bought 10,000 shares on Monday at 5c.
Mrs Doyle while having some tea, went on the internet and found a numerology website which proclaimed to have great stock market strategies. One such example was to buy the top five stocks of an American index at 8 p.m. on the night of a full moon and to sell them at the Spring Equinox at 2.45 p.m. She thought it was worth a try!
Dougal has a big interest in the stock market and has done a number of courses on how to profit from it. He buys a book in Morocco that promised anybody can make 50% growth in the year, but it requires a lump sum of 50,000 to start, 50 hours a week of research and an accounting degree. He buys the book, thinking that it cant be that hard and he will manage it alright!
Ted works in the I.T. sector and knows his industry very well. He does a lot of research to find some highly undervalued stocks. He buys them and leaves them alone. He looks back in seven years time and finds that they have doubled, but had been at 500% after two years.
What do you think of these decisions? Would you have done the same? What do you think the likely outcome of these scenarios would be? What could you advise these people to do instead?
He has no idea why that person at the bus stop felt the hot stock was a good buy. He only bought one stock and didnt spread his risk or diversify at all. He didnt look into the stock at all himself or get a knowledgeable opinion. He didnt have a plan as to when to sell
The strategy she found was not time tested. She did not check the credibility of the author
He wasnt willing to give the research the time in order to follow the strategy, which was time intensive. He didnt have the skillset to be able to replicate the strategy, which clearly is not easy to follow.
He didnt have a plan as to when to sell the shares
Easy to Follow Time Tested Make sense! Understand why youre buying Know when and why you will sell A number of stocks