The Bull Hunters Guide

This is the last post for a while to cover the topic of basic investment strategies. In the coming installments, I’ll branch out into more diversified topics and try to get a little more in depth into each one. In the meantime, I hope you’ve enjoyed this series on basic stock market strategies and I sincerely hope that they’ve improved your ability to successfully invest in the market and see good returns.

Please refer your friends to this blog so they also can enjoy a free way of improving their investment knowledge. Now, back on topic: Basic Investment Strategies.

Reinvesting your interest

For this article, I’ll cover a tip that more people need to take advantage of in order to keep the cycle of their investment going. Namely: reinvesting the interest.

First of all, never draw from your portfolio for spending money unless it’s absolutely necessary. You should have a separate savings account for matters such as that, and it’s from here that you draw when you need to travel, or make repairs to your home, or things of that nature. Your portfolio is a long term investment, and drawing from it early is a blow that will strike you much later down the road, with a force magnified many times over.

Moreover, because it’s a long term investment, avoid the trap of seeing the interest generated by your investments as “free money”. Sink it right back into your investments by buying more shares, so that the cycle can continue and that your payouts will grow larger and larger.

Check the balance of your portfolio

Try and keep a schedule going where you regularly check the cash balance of your portfolio, and when it hits a certain amount, spend some time looking around and buy new shares, either in new holdings or more in ones that you already have a stake in.

By treating your investments in this way, you are ensuring that your profits are maximized because the interest will continue to compound over the years (and usually at a rate much, much higher than typical means of savings such as bonds and savings accounts). Your portfolio will thank you for it.

Thanks for hanging around for the 12 week series of Basic Investment Strategies. I sincerely hope you have enjoyed it. Please leave a comment in this blog if you appreciate the effort and I will reward you with plenty more stock market investment strategies.

Join me next week as we start our trek into some more in-depth investment topics: Stock Picking Strategies.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008

Social Bookmarks:

Investing should be a long term activity. To really get the most out of it, it must become an integral part of your life and daily routine. Therefore, today we’re going to be talking about the concept of “dollar averaging” or consistent investment of a specific set fee over a long period of time.

Dollar averaging investments

Many people view this as something like “paying the bills”, and if that helps you to think about it and remember to do it, more power to you. But what dollar averaging really is, is a personal commitment on your part to continuously feed money into your investments on a regular basis, rather than just letting them sit and do what they will. Think about it. If you were using a regular savings account instead of the stock market, would you just rely on the accruing interest, or would you continue to put money into it when you could, week by week, or month by month? Almost certainly, you’d want to invest in the wiser of the two options, the second one. The stock market is no different.

Set aside some money out of your monthly income (it doesn’t matter how much it is, just however much you’re comfortably willing to part with), and then invest that into your portfolio. This should be the same amount of money each and every month, and it is a practice that has a lot of non-obvious benefits.

Your stake in a company

Firstly, if you’re investing the same amount of money each and every month into your stocks, it’s easier to draw some conclusions about the direction that those stocks will go in. For instance, if you know you’ll be investing x amount into a stock next week, that’s something you can depend upon. You will be able to say that you have x stake in a company, without really wondering about whether that stock is going up or down. Regardless, your value is increasing, and you have more to work with in order to maximize your total profits.

Secondly, it’s a good practice because it keeps you actively engaged with the market. During slow periods, people might sometimes forget to check on the status of their investments for several days at a time. This could easily lead to disaster. However, if you’re continuously investing into your portfolio, it’s always fresh in your mind, and the incentive to check it is always looming. It keeps your investments growing and keeps you on your toes.

See you next week for part 10 of Basic Investment Strategies.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008

Social Bookmarks:

We’ve talked a little bit in the past about avoiding panic and not succumbing to the urge to totally change your investment strategy due to a forecasted bottoming out in a typically sound industry or other similarly baseless projections. However, this of course does not mean that you should stick in there and weather every storm that comes along. Of course there will be a time when you actually should sell some of your interests and move on to greener pastures.

Adjusting or abandoning your strategy

The real trick is knowing the difference between adjusting your strategy and abandoning it altogether. Say for instance that much of your portfolio is occupied by investments in sound technological industries, like telecommunications or other technologies that have been around a long time and have become an integral part of human life. Huge surges and catastrophic losses are effects that tend to plague the life of new industries. The longer a stock has been around, the more it tends to equalize. Over time, the chances of a massive gain or loss will tend to stabilize and an investment can be considered to be lower-risk. Therefore, don’t panic in the case of these investments, even if they look shaky. You are very unlikely to “lose the farm” due to a single stock bottoming out, especially if the stock is in an area with a long history.

Selling stocks in your portfolio

However, like we mentioned, there will of course be times that you should adjust your strategy. Selling one or two of the particular stocks in your portfolio is a far cry from selling everything and starting over and should be considered a normal part of trading. The general rule of thumb to be followed is to look at each stock individually. If you have net losses in any stock, ask yourself whether or not you would buy shares in it today, as a new investment. If the answer is no, go ahead and sell it off. Chances are that waiting to break even on a stock like that will just frustrate, and in the meantime, you could be putting that money into a stock that will perform better.

Making a calculated move to greener pastures is what a smart investor does. This is adjusting your strategy, and is the technique to shoot for.

See you next week for part 6 of Basic Investment Strategies.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008

Social Bookmarks:

In the last couple of installments, we’ve talked about things like acknowledging that slumps and temporary downs are a normal part of the stock market, as well as the fact that analysis of past performance is not in any way a reliable indicator of future performance. Today, we’re going to put those two principles together to understand a little bit about how to deal with situations that look truly bleak; how to handle them without resorting to panic.

Panic is the enemy of your finances

Panic is the enemy in any situation regarding finances. Financial matters are extremely important to all of us because they represent more than our bank account or our portfolio, but also our livelihood and the quality of life that we are able to lead. As such, every financial decision is one that warrants a lot of sound deliberation and consideration before committing to it. It’s unfortunate, then, that the fast pace of the stock market sometimes encourages people to make rash decisions, especially when they think they see dark clouds looming on the horizon.

The downward trend of panic

Say that you have money invested in several different stocks, and you’re beginning to notice an overall downward trend. For whatever reason, this leads to a panic. You start to picture how it would be to lose every cent that you’ve invested and be reduced to nothing. You sell off every stock you own and adopt a totally new strategy, investing in a number of totally new stocks across the board, whose performance seems more likely to live up to your standards. However, in doing so, you miss out on a unpredicted surge in the stocks you just sold.

Adjust your investment strategy

If you had taken just a little more time to think about things, you might have realized that your stocks were in a sound industry, one that had been around for years. As such, the risk of a total bottoming out is virtually nil. You could have adjusted your strategy and maybe invested in some other stocks without totally selling off your current interests. However, panic robbed you of that potential.

Panic is the enemy. Let rational, sound judgment be the basis of your financial life, not it.

See you next week for part 5 of Basic Investment Strategies.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008

Social Bookmarks:

I have been promising a part 2 to The Bullhunters Guide eBook. My ideas haven’t come to fruition so far. Instead, I have put together a 12 Part Basic Investment Strategies blog series. It will be posted weekly here in The Bullhunters Guide.

This blog entry is the first in the series. The series has been designed from the ground up to help you get more actively involved in the world of investing, so that you can get the most out of your investments. Our approach is to take the amateur investor and slowly introduce him or her to the more sophisticated and advanced concepts that are practiced to great profit by the professional traders in the industry. In other words, this is a tutorial in how to become wealthy! The series will be rather long, and each blog entry will concern itself with one particular technique that you can add to your repertoire of investment knowledge and strategies in order to become a stronger player in the stock market. So, just sit back and relax, and try to take this all in. Ready to start maximizing your earning potential? Then, let’s go!

This time, we’re going to get off to a really basic start and discuss the virtues of diversification. Chances are good that you’ve heard the jargon thrown around on a few television dramas from time to time about how so and so was in dire need of “diversifying his portfolio“. Well, that trope had to come from somewhere.

Diversify Or All Your Eggs In One Basket

Diversification is a rather simple concept that simply refers to the idea of “not putting all your eggs in one basket“. Many beginning investors are often tempted to buy a huge number of shares in a single stock, because the initial cost of sales commissions will usually be quite a bit lower than if they had taken that same amount of money and bought just a few shares in a wide number of stocks. Furthermore, they tend to think that without a substantial number of shares in a stock, their payout will never “amount to anything”.

Try and overcome this way of thinking. The upfront costs might be higher, but what will you do if that one stock you put everything in collapses? It’s happened to many people and it can easily happen to you. Avoid this potential by spreading your funds around in a variety of interests, preferably across a number of different industries. This should help to protect you somewhat against market forces that can sometimes capsize a whole industry worth of stocks and leave you with losses in every single stock in your portfolio.

See you next week for part 2 of Basic Investment Strategies.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008

Social Bookmarks: