Matching Stocks and Strategies with Your Goals

Various stocks are out there, as well as various investment approaches. The key to success in the stock market is matching the right kind of stock with the right kind of investment situation. You have to choose the stock and the approach that match your goals. Before investing in a stock, ask yourself, When do I want to reach my financial goal? Stocks are a means to an end. Your job is to figure out what that end is or, more importantly, when it is. Do you want to retire in ten years or next year? Must you pay for your kid’s college education next year or 18 years from now? The length of time you have before you need the money you hope to earn from stock investing determines what stocks you should buy.

Dividends are payments made to an owner (unlike interest, which is payment to a creditor). Dividends are a great form of income, and companies that issue dividends tend to have more stable stock prices as well. Every investor has a unique situation, set of goals, and level of risk tolerance. Remember that the terms large-cap, mid cap, and small-cap refer to the size (or market capitalization, also known as market cap) of the company. All factors being equal, large companies are safer (less risky) than small companies.

Investing for the Future

Are your goals long term or short term? Answering this question is important because individual stocks can be either great or horrible choices, depending on the time period you want to focus on. Generally, the length of time you plan to invest in stocks can be short term, intermediate term, or long term.

Investing in stocks becomes less risky as the time frame lengthens. Stock prices tend to fluctuate on a daily basis, but they have a tendency to trend up or down over an extended period of time. Even if you invest in a stock that goes down in the short term, you’re likely to see it rise and possibly go above your investment if you have the patience to wait it out and let the stock price appreciate.

Investing for a Purpose

When the lady was asked why she bungee jumped off the bridge that spanned a massive ravine, she answered, Because it’s fun! When someone asked the fellow why he dove into a pool that was chock-full of alligators and he responded, because someone pushed me. Your investment in stocks should not happen unless you have a purpose that you understand, like investing for growth or investing for income. Even if an advisor pushes you to invest, be sure that your advisor gives you an explanation of how that stock choice fits your purpose.

An elderly lady who had a portfolio brimming with aggressive- growth stocks because she had an overbearing broker. Her purpose should have been conservative, and she should have chosen investments that would preserve her wealth rather than grow it. Obviously, the broker’s agenda got in the way. Stocks are just a means to an end. Figure out your desired end and then match the means.

About the Author

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Christmas And The Ghost Of Forex Past

With Christmas fast approaching and another New Year almost upon us, it hardly seems possible that 2007 is already reaching a close.

Around this time every year the TV will undoubtedly be showing one of the many versions of “A Christmas Carol” originally written by Charles Dickens in which Scrooge is visited three ghosts - The Ghost of Christmas Past, The Ghost of Christmas Present and The Ghost of Christmas Future.

Many versions of this popular Christmas Classic have been filmed over the years, and even Bill Murray has starred in one of the more humorous versions. My personal favourite is the 1951 version starring Alistair Sim.

In the story, Scrooge - a very mean, money hungry and unkindly man - is shown the error of his ways by the three ghosts. The first ghost shows him where he went wrong in the past. The second, how he is now viewed by his peers and the final ghost shows him what the future holds if he does not change his ways.

So how does your forex trading stack up to the scrutiny of the three forex ghosts this Christmas?

How did you fare in the past year? Was your trading up to the standard that you would wish it to be? Or did your trading leave much to be desired?

Did you exercise caution and patience measured with self discipline? Did you plan the trade and then trade the plan or were you so money hungry that you simply threw caution to the wind and traded every rumour and tip that you heard?

When examined by the ghost of forex present, how did you do? Was 2007 a profitable year or could it have been better? Did you have a plan or trading system and stick to it? Are you able to acknowledge that you are where you are right now as a direct result of your own decisions - good or bad?

As can bee seen from “A Christmas Carol”, it is never too late to change your ways!

If your trading has been less profitable and less pleasurable than it might have been, take a leaf out of Scrooges book and mend your ways.

Never trade without a plan or system. Always have the discipline to stick to that plan or system. Understand that trading is about winning and losing and accept both with good grace, but make sure that your plan or system consistently gives you more wins than losses.

Remember that trading takes time and patience. Many traders fail not because they do not have the ability, but because they wrongly believe that they need to be in a live trade for most of the time that they are trading. In truth, successful traders spend more time watching and waiting than actually being in a live trade.

Be generous. If you have made money this year - give some to a worthy cause.

Before we know it, Christmas 2008 will be knocking on the door. Make sure that if the forex ghosts visit you next Christmas, you will have had a year to be joyous about.

And on that note, I would like to wish you a Very Merry Christmas and a Most Prosperous New Year.

Martin Bottomley is a full time professional forex trader, acknowledged author, forex tutor and co-developer of forex trading software including The Amazing Stealth Forex Trading system. You will find more information at: http://www.stealthforex.com

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