How to make better sense of this stock market game
Knowing when to buy shares is only one aspect of investing in the stock market. Knowing when to exit and how to manage a diversified portfolio are even more important. But investors pay very little attention to these factors. Through the following article, I’ll outline how you can make better sense of this stock market game.
Portfolio Evaluation
When I evaluate a new clients portfolio, by all means, I quite often find that the decisions to buy shares have been mostly at a reasonable price. The amount of thought and effort that is put into making the decision to buy means the client is usually quite informed on what potential the company has for the future.
But this expectation for how the company should perform can also be the investors downfall. When the stock price does not perform as expected, the investor cannot explain why and they end up reverting to the “Hope and Pray” method of investing. That is, hoping and praying the stock price will recover. Ever heard the statement “It’s a good stock, it’ll come back!”?
The stock market game should be an unemotional transaction
Professional investors have a game plan. Even before they have invested in a stock, they have conducted their due diligence of analysing the future potential, established where the Risk factors are, and established a money management plan.
The Stock Market Game is simple. You have no control over the end result. What you have control over is the strategy you adopt and the decisions you make along the way. If, before you enter into a stock position, you have evaluated all possible outcomes, gathered all relevant information, and surmised a potential scenario that has a high probability of achievement, you can then invest your hard earned capital based on the knowledge you have at the time.
Strategy for any possible outcome
Your strategy should cater for any possible outcome. Simply put, the stock price will rise, fall or remain steady. If, for whatever reason, the stock price does not do what you expected it to do (for example rise), then your strategy will tell you what to do and when.
This is where majority of investors don’t manage their stock market game plan as well as they should. If this is the case, then I recommend contacting a professional advisor (such as myself!) to discuss how you can improve your performance in the stock market.
Treat your investment portfolio as a professional stock market game. Establish a plan, know the various outcomes, but most importantly, take action when action is required.
Matthew Brown – US Stocks & Options specialist
Client Advisor
Halifax Investment Services
ASIC Australian Financial Services License Number – 225973
If you would like to learn more about the strategies you can use to profit from any type of market direction, visit www.australianinvestmenteducation.com.au or you can contact Matthew on brown@halifaxonline.com.au
Matthew is an Authorised Representative of Halifax Investment Services (Halifax). Halifax provides broker services, including Full Service and Discount Services using multiple trading platforms. For Discount platform services, Halifax charges the same fees for phone service as the online trading platform.
