investing
What you need to Lunch Break Invest
There are a few things you will need to use the Lunch Break Investing strategy. If you are reading this, chances are you have most of them.
1. Computer Access (I know, duh!)
If you do not have easy internet access then a laptop or netbook will be useful. For security reasons I would recommend mobile broad band. This is the most important item on the list.
2. Stock Watch List
This is your master cheat sheet. Put it somewhere you can easily access it. List the stock symbol and buy price. When the stock is close to your buy point, buy!
3. Written Strategy
It must be written and accessible. Following your written rules will eliminate some emotion and will protect your capital. Never guess on your rules. Write them down and follow them!
4. Cell Phone
Not really a must, but can be very useful. A smartphone, like an iPhone, is not a replacement for a good laptop/netbook, but it can give you quick easy access. I have bought stocks sitting in my car waiting on my kids to leave school. Getting text message alerts on stocks is also useful.
Post your list of necessities in the comments. I would love to see how everyone is using technology and gadgets to do better investing.
Happy trading!
Trailing Stop Loss
A trailing stop loss allows an investor to set a loss limit (dollar or percent) on their stock. As the stock trends upwards the limit follows. Example: If you set a $1 trailing stop loss on a $5 stock and the stock drops to $4, it auto sells. If the stock moves to $6, the limit is $5. This a nifty option that protects your capital without constant monitoring.
This is handy for you lunch break investors. Say you go to lunch and have a nice burrito. You find the dream stock that is going to make you millions. You buy! Just in case, you set a stop loss at 8%. Now this awesome stock grows and grows. Then one day, bang! It’s not a hot stock any more. Your trailing stop loss kicks in and sells at 8% under the last “up” closing price. Now you made millions without trying. Or in some cases stopped your loses before you lost a bug chunk of change.
Use trailing stop loss to protect your capital and profits.
Lunch Breaking Investing Rulebook
After careful consideration, I have decided to try a new investing strategy. I’ve found that I do not have time to use the traditional rules. My rules will have to fit my time constraints. In other words, it has be easy and simple enough to do during my lunch hour.
Here are my Lunch Break Investing Rules:
1. Only buys stocks on the watch list.
2. Must be trending upward.
3. Must have a trending sweep of at least 10%.
4. Buy only at the bottom trend line.
5. Set a loss limit (2-3%).
5. Set a trailing stop loss to 8% below the bought price (dollar amount on the stop loss, not percent)
6. Set a profit limit (5-10%).
6. Allow the stock to trend upward until trailing stop loss is activated.
7. Never break any of these rules.
8. Adapt my strategy as needed.
Over the next several weeks I will be expanding on each of these items. I will also concentrate on the automation and mobile techniques.
Comment and share!
6 Steps To Buying Stocks
The first time I bought any shares of a company I was terrified. I had no idea what I was doing and if I was doing it right. Believe it or not, it’s not painful and it’s very easy to do.
I use Scottrade, so my steps are more geared toward their service, but its similar for most places.
Step 1:
Log into your brokerage’s web site and click buy. Scottrade’s option is on the left side. Be sure you have enough money deposited into your account. If you do not, deposit the money and proceed to step 2.
Step 2:
Enter the stock ticker symbol. (Example: GE is General Electric and PG is Proctor and Gamble)
Step 3:
Enter the number of shares you are buying. To find this number you take the amount you are investing divided by the current share amount.
$1,000 (amount invested) / $10.00 (the current share price) = 100 shares.
Be sure to leave a little extra available for the commission and price changes.
Step 4:
Market vs. Limit
The “Market” options buys the stock at the current price or close to it when you click buy.
The “Limit” option allows you to enter how much you are willing to pay for the stock.
I used to use a limit on all my buys until I figured out that I was wasting more time chasing a stock within pennies of where I wanted to buy. I now only use the “market” option. Those few penny changes doesn’t worry me as much. If I was trading millions (I wish), it would be different.
Step 5:
Click Review/Buy (wording may vary by service).
Step 6:
Celebrate! You bought stocks and are on your way to accomplishing your financial goals!
Happy Trading!
How to Find Companies Worth Investing – Part II – Components
In my post, How To Find Companies Worth Investing – Part I, I talked about investing in companies that make the products that you use and love. Now let’s look at companies that help make those products happen.
Let’s say you don’t want to invest in HP or Apple. What about the companies that make the components of their products?
Typical Components Inside a Computer:
CPU – Intel (INTC) or AMD (AMD)
Video card – Nvidia (NVDA), ATI (part of AMD)
Monitor – HP (HPQ), LG (KRX)
There are plenty of excellent companies that you can find that make the bits and pieces of your favorite products. Do a search on google or wikipedia to find who makes what.
Happy trading!
How To Find Companies Worth Investing – Part I
Peter Lynch is well known for saying, “Invest in what you know”. With that in mind, one good place to find companies to invest is the grocery store or mega super store that is the size of a small country. The products that you buy, use, consume and generally can’t live without are made by some of the best companies to invest. List your 5 favorite products and do some homework.
Here are my 5:
1. Tide
2. Starbucks coffee (it helps me write)
3. Coke Zero
4. Doritos
5. Cheez-its
What companies make these products?* A quick search on Wikipedia shows:
1. Tide – Proctor & Gamble Co. (PG)
2. Starbucks – Starbucks Corp. (SBUX)
3. Coke Zero – Coca-Cola Company (KO)
4. Doritos – PepsiCo, Inc. (PEP)
5. Cheez-its – Kellogg Company (K)
That was easy! I now have 5 companies to do my investing homework. On your next visit to the grocery store, check out a few of your favorite products. Who makes them? Leave a comment below and have fun trading!
* These stocks are listed for example purposes only and I do not endorse these companies. Remember to always investigate and consider the risk before investing.
My 2010 Financial Goals
It’s always good to have a plan. Without a good solid plan or at least some idea of where you are going, you will get lost on the way through the new year. Be sure to make achievable goals. Here for all to see is my 2010 Financial Goals:
- Learn and use swing trading
- Open a CD account for youngest son
- Continue to work toward my goal of trading to own my van
- Read one financial book a month
- Review and Readjust my 401k
- Take one investing class
- Learn and use Long Term Value Investing
In the spirit of goals, I’ll also list my goals for this blog:
- 2 posts a week (no excuses)
- Podcast (later in the year)
- Add video
- New layout
- New affiliates
- Ebook (later in the year)
- Email list
- Requests and Suggestion box
Sound off in the comments and let me know what your financial goals are for 2010. Good luck on your financial goals and HAPPY NEW YEAR!
Paper Trading – Testing the waters for sharks
Don’t risk your money on untested strategies. You will get bitten by the Wall Street sharks. I always test my new strategies on paper for a month. Its fantasy stock trading!
Here are the rules:
1. Pick your dollar amount. Be realistic. If you aren’t trading in the millions, don’t do it on paper. $500 is a good starting point.
2. Write down your rules and stick with them.
3. Your buy amount is the closing amount of the day you buy. Write down the date and amount.
4. When you sell, it’s the closing amount on the day you sell. Write this down as well.
5. After a month check your profit/loss. How did you do?
By doing this, you can decide if the strategy has merit or is a dud! Its better to find this out before you risk money. This is good for short term trading. If you are in the process of saving money (Part 1 – How much money do you need? Investing for only $50 a month) then use this to get more familiar with the market (long term or short term). You can modify the rules a bit to try day trading, but it’s more extreme.
Got a new rule to add, a question to ask or simply want to comment please do so below. I love comments, it brings joy to blogging!
Best Christmas Present – Stocks
Every Christmas and birthday my kids get many presents. A few weeks later the presents are mostly forgotten or broken. Such a waste! I started brainstorming ideas that could cut down on the clutter and be a long term benefit for them. I considered savings accounts, bonds, cds and the cookie jar. Stocks was the winner!
Here are my reasons for picking stocks:
1. High dividend stocks make money for them.
2. Stocks splits give them more stocks.
3. My teen thinks its cool to have a stock portfolio (my youngest,8, doesn’t care right now).
4. I pick stocks of products that they like. In our case, they get 4 McDonald’s stock a year.
5. If you aren’t into picking stocks, go with an index fund.
Four a year? That’s not much!
True, but take the case of my 8 year old. He will have 40 shares when he turns 18, plus the dividend that gets paid. It doesn’t take long for the stocks to accumulate enough dividend to start buying more stocks. Keep reinvesting the dividend, it adds up!
Risk
I know that the market will go up and down. This is a long term investment for them. I’m not taking too much risk
What about fees?
I use Sharebuilder for my kid’s portfolio. Their service is a bit odd in that you get a $4 fee when you buy on Tuesday (and only on Tuesday), other days it’s $12. Since my kids only buy twice a year and aren’t gaming the market it works out best for them. They also allow custodian accounts which is what you will need.
Action time:
1. Decid how much to buy.
2. Sign up for a service like Sharebuilder.
3. Open a custodian account in your child’s name.
4. Deposit the money.
5. Buy!
If your kids keep the investment going, they could potentially have a million when they retire. Like I said earlier, this is a long term benefit for them!
Beginning Investing – Part 3 – Choosing an investing style based on your goals
If you are new to this site you may want to start with part 1 of this series. If you are a returning reader, Welcome Back!
By now you should have created a plan to save money for investing and have several goals in mind. Today it’s time to consider what style of trading you will need to reach your goals.
Long Term Goals (10+ years)
For big long term goals like purchasing a home, you will need a long term investing strategy. Invest in value stocks or any investment that pays a dividend.
Strategies include:
⁃ Dividend paying stocks – usually Big Cap stocks
⁃ Value Investing
⁃ ETF’s
⁃ Mutual Funds
⁃ Index Funds
It’s best to reinvest any dividends paid. Remember, you want less risk with these goals.
Intermediate Goals (5-10 years)
These are goals such as luxury vacations (Paris, Kentucky* in spring?), luxury car**, or any big ticket “want”. The item tends to have the word luxury associated with it.
Strategies include:
⁃ Value stocks
⁃ Small-Cap
⁃ Growth Stocks
Look for companies that are growing their business or good companies whose stocks are undervalued. Your goal is to create a portfolio of stocks you can cash in for a nice profit in the next 5-10 years. You’ll take on more risk for greater reward.
Short Term Goals (1 day – 5 years)
Short term trading is the riskiest, but with the high risk comes a larger reward. Your goal in short term trading is to buy and sell in a short period. You may keep a stock a day or over a year depending on your strategy.
Strategies include:
⁃ Day Trading
⁃ Swing Trading
⁃ Value Stocks
⁃ Penny Stocks
⁃ and many more…
BIG WARNING: SOME OF THESE STRATEGIES WILL LOSE MONEY. Short term trading is VERY risky!
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* Yes, there is a Paris, Kentucky. Fun fact, the first winery in the United States was in Kentucky. Oddly, it’s not related to Paris, Ky.
** or pickup if that is your thing
