You have a good job with a paycheck and routine bonuses. You have purchased a home, paid off your credit card debts and put six months’ worth of savings in the bank. Now is it time to invest your money for the long term. What are your options? Let us assume that your full time job shows a lot of promise and that it keeps you busy. And let us assume that you are married and have started a family, or wish to do so shortly. What this means is that when you invest your money you will not have a lot of free time for pursuits like day trading stocks or jumping in and out of stock investments in search of short term profits. You distrust investment management advice in the form of stock tips. And you are not particularly interest in those folks who want to charge you several percent of you investment capital in order to, maybe, make you a profit. How do you invest your money so that you have a comfortable nest egg for retirement, money to send your kids to college and profits that can rolled over into other investments or business ventures?
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A Long Term Investment Strategy
There are lots of potentially viable stock market investment strategies. But, any strategy that you use when you invest your money should fit your own circumstances and your own plans. In this instance we want to look at the scenario that we described at the start. You have paid off credit card debt, purchased a home and put enough money in the bank to cover short term emergencies. You are busy building your career and your family and do not have time to constantly trade stocks, especially foreign stocks that may require more time for sound fundamental analysis. What we are aiming at is picking several long term investments with strong potential for comfortable returns on investment (intrinsic value) and security against financial loss (margin of safety).
Timing and Due Diligence
Keep the number of investments that you need to track at five or fewer. You should at least check stock prices of your investments once a week and you should read quarterly and annual reports on all of your investments. It is basic and in fact critical that you understand how a company makes money and intends to continue to make money. And it is critical that you pick investments with a margin of safety in the form of cash reserves, strong market sector position and a currently reasonable stock price. There are lots of really promising companies and many of these have already been bid up by the market. Do not jump in and invest your money on a stock that has run way up in price only to see thirty percent of your investment disappear as the stock corrects. You can run endless stock screens on sites like Google Finance to find stocks with attractively low price to earnings ratios and you can look at what these companies do and how their stock prices track over the years. As you want to know and fully understand how a company makes its money it may be best to start out with companies that sell products and services about which you have some expertise. Doctors, nurses and pharmacists certainly know about pharmaceuticals. Anyone working in the oil sector knows about big oil companies or oil exploration companies. Any anyone working in transportation has insights in that sector. Take your time. Start slowly. Audit your results and modify your approach based on your degree of success or failure. And remember that when you invest your money you have a set of long term goals. Always invest with the end result in mind.