Lunch Break Investing

Investing ideas so easy you can do them on your lunch break!

Posts Tagged ‘Part 2’

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

Investing for Beginners – Part 2 – Why are you investing? Have a goal in mind!

If you already have the money, great job! If not, keep saving and don’t get discouraged.

Your next step is to decide on your investing goals. Having an investment goal is important. What good is investing if there isn’t a reward for doing good. After choosing a specific goal, I found that I was more interested and made better decisions based on my goals. Your goals will also determine your investment style. Short term goals for short term investing and long term goals for long term investing. Don’t worry, it’s OK to have several goals. Just don’t pick too many, unless you have the cash to cover all of them.

Here are a few examples:

Pay off car (that’s one of my goals)
Retirement
Buy luxury vehicle
Buy a home
College
Luxury items (big TV, gadgets or other nice wants)
Big vacation – Is there somewhere you would really like to visit? Like the Fried Chicken Festival in Corbin, KY (not making this up and I want to go!).
Quit job – It would be nice to be independently wealthy. This one is hard, but possible.

Warning:
I tried investing for money and it didn’t work out well for me. Just being rich is a nice goal, but harder to obtain without the details to get you there.

Action Time:
Name one or two goals with a reasonable deadline. Write them down or create a goal board with pictures of what you want to achieve. This will keep you on track and interested.

Now that you have your goals, you can decide on your strategy and style of investing.

Here is how I put this into practice:

I’m hoping to pay off my new van early. I’m shooting at short term investing. I add a little extra money every month to my initial investing and shoot for small quick profits every week (swing trading – more on that later). This also keeps me focused on what financial books and resources to use.

Related Posts:
Investing for Beginners – Part 1 – How much money do you need? Investing for only $50 a Month!

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