My Simple 7 Step Stock Investment Strategy Revealed

Stock Investment Strategy

I get a lot of questions about what I invest in and how I invest. Part of my investment strategy is investing in stocks. Saying that, I want to be clear I am not a financial advisor and I am only sharing my stock investing strategy to give you an idea of what has worked for me.

That being said, let’s dive into my simple 7 step stock investment strategy.

Step 1 – How Much To Invest

The first step in investing in stocks is to decide how much money you’d like to invest in stocks. This should be excess income. Investing in the stock market is risky and if you are going to need the cash right away, I wouldn’t recommend putting it in the stock market.

If you want to day trade this post isn’t for you. If you want to hold onto your stocks for awhile then this post is for you.

Alright, once you’ve decided how much you can invest in the stock market, move to step 2.

Step 2 – Decide If You Will Keep the Stock Long-Term or Short-term

Having a plan when starting to invest in stocks is the best route to go. Decide if you will keep the stock more long-term (years) or more short-term (a year or less).

This will help determine if you should follow the stock for a while to see when it dips down and then you can buy and then sell when it goes back.

I don’t day trade, but there have been some stocks I’ve only kept for a few weeks because they had dipped so low when I bought I knew they’d go back up pretty quick. Like during Brexit.

I just want to emphasize, there was still a risk I was taking when I bought. I took money from my cushion cash fund, so I still had the money (I wasn’t taking out a loan or using money I would need to pay my bills) and knew I could build back up that fund pretty quickly if I needed to. I do not recommend investing in the stock market if you do not have extra cash or will need the money sooner than later.

Step 3 – Look for Familiar Companies to Purchase Stock in

I’ve heard both sides of this strategy, but it’s the strategy that’s worked for me. Come up with companies you know, you are familiar with, that seem to be doing well and will continue to do well (it will still be a company people need or use in the future). Check to see if they are publicly traded. You can see if they are publicly traded by just searching the company name online with the words ‘ticker symbol’ after the company name. If they are publicly traded your search will show their ticker symbol (the abbreviation for the company that is used to buy or sell the stock in the stock market) and the price of the stock. For example, if you wanted to know if Facebook is publicly traded, you would put in the search field, “Facebook ticker symbol,” and the results will show you, “FB” with the price.

Sometimes the company is owned by another company, which will show in the search results as well.

There’s been a couple stocks I bought that I didn’t know anything about. People recommended them to me, but I wish I wouldn’t have purchased them. One of them is down and I would feel better if I knew more about the stock and had been more familiar with it.

I currently have 11 stocks. I’d recommend purchasing no more than 10 stocks. You’ll need to keep an eye on your stocks and if there’s too many, it could just feel overwhelming and you may just forget about them because it takes to too long to review them.

Make a list of 10 companies (could be more or less depending on what you’re plan is) you’re familiar with that could be possible options to invest in. Check to see if they are publicly traded (if they are companies you can actually buy stock in).

You don’t need to invest in all of these companies, just get a list of possible companies you can invest in and move to the next step.

Step 4 – Figure Out How the Company is Doing

I’m sure you’re wondering how to know if the company is doing well. Honestly, I don’t take hours looking over financial statements and the history of the company (although this is probably a good idea). Since I’m already familiar with the company, I know how they are doing in the marketplace, if they are building new stores or if a lot of their stores are closing. I know if people use the company a lot or if it seems to be a thing of the past and I’m the only one holding onto the company.

If you’re not really sure how the company is doing in the marketplace, Google the company. See what news articles come up. Look for things like if they are opening new stores or if their financials aren’t doing well or if they are laying people off, etc. You can get a feel for how the company is doing.

Pay attention to how long the company has been around. If you are investing for the long-term, an established company can be more reliable because they have already shown they can stay in business. Make sure they are the leader in their industry (if they have hardly any competitors, that’s even better) and are willing to adapt to changes in the market. Amazon is a great example of a company that has been adaptable because of how they continue to expand. They not only sell products, but provide music, audio books and more.

I also check the history of the stock price. Earlier, when you searched for the ticker symbol of the company, it shows you a graph of the price of the stock. I look at that graph. I’ll change the date range from today as far back as it will go. You can see if it’s been on an upward trend or a downward trend. If it’s super volatile (going way up, then way down, then way back up, then way back down in short amounts of time) or if it’s just been pretty steady. I like to get an idea of how the stock has done in the past, it doesn’t always tell the future, but it can give you some sort of idea on how it should be moving going forward.

Step 5 – Decide to Buy Now or Later

If I feel good about the company’s past performance and what’s happening to it currently. it seems like it will continue to do well then I’ll either watch the stock for awhile or purchase right away. (See my previous post, 3 Super Simple Steps to Start Investing in Stocks, it will give you step by step instructions on how to set up your brokerage account and purchase your first stock.)

If you don’t feel good about the company’s stock then go back to step 3 and find new possible companies.

You can put your stocks on a watch list if you’d like (you can do this in your brokerage account). It just means you can enter in the stocks you want to ‘watch’ and when you log into your account, it will show you the stocks’ prices in one place so you can decide if you’re ready to buy or not.

I’ll purchase the stock right away if I see that it has dipped down recently. If I see that it has jumped up recently, I may watch it for awhile to see if it drops a little. It just depends on your personality. If you’re okay with waiting for a bit (which could mean it could just continue to increase, so there’s still a risk) or if you’d rather just purchase immediately (just get it done because you know you won’t do it later), is up to you.

If you have a maximum price you’d be willing to pay for the stock, you can set that up in your brokerage account and when it falls to that price, the stock will automatically be purchased for you. (The steps for that are also in my earlier post.)

You can also purchase 2 shares of the stock at the current price and 2 later at a different price, which could average the price out if the first two you purchased were a higher cost. Shares is the number of the one stock you have. If you entered quantity ‘2’ of Facebook in your brokerage account, then you would have 2 shares of Facebook, FYI.

Check the stock price history, and any recent articles, of at least one of the stocks you came up with earlier. Decide if now would be a good time to buy or if you think you should wait.

Follow my steps for starting to invest in stocks in my earlier post and purchase your first stock or put it on your watch list.

If you’re nervous to purchase your first stock, you can put it on the watch list and see how performs to see how much you would have gained or lost over the next month to give you an idea.

But if you’re ready to buy, you can start with one stock that isn’t very much and see what happens. Just make sure you don’t need that money right away.

Step 6 – Keep Emotions in Check

Going back to Step 2 where you decided if you are purchasing the stock for long-term or short-term, I always want you to remember your purpose for purchasing the stock.

Emotions can make sane people do crazy things.

If you are investing in the long-term then don’t check the stock everyday. You can check it once a month and re-evaluate. Make sure it’s still performing well and it’s looking good in the marketplace. You can decide if you need to sell or buy more shares.

I do not want you freaking out and selling if it the stock drops. Your motto should be, ‘Sell High, Buy Low.’ I have Netflix stock and that stock is very volatile. If I would have sold the stock when it dropped 20 points ($20) I would have been very upset because not too long after it dropped 20 points it came back up 40 points. So, just breathe easy. We aren’t investing money we need right away and most stocks tend to trend upward. If we are evaluating them every month then we can see if it looks like it’s starting to downtrend and we can sell. We do not make rash decisions in the stock market.

If you are investing for the short-term then make sure you’re watching the stock more closely and that you purchase when it has a dip. Set a maximum price you’d be willing to sell it and sell it when it gets to that price. It could continue to still go up, but it could also drop. So know what price you want and take it when it comes. Then accept whatever happens after. You can’t change your previous choices, but you can learn from your previous choices to continue to make better choices. Accept what has happened in the past and move forward.

Step 7 – Things to Look For

The economy fluctuates a lot and a lot of different things are going on in the world that could affect the stock market (like a new president or Brexit or Blood Moon).

Keep tabs on what’s happening in the world that could possibly affect the stock market. If you’re aware of what’s happening you can capitalize on that in the stock market. For example, when Brexit happened, stocks dropped significantly and they bounced right back up. If you are ready, you can take advantage of things like that.

So remember: buy low, sell high, keep tabs on your stocks and invest money you can spare.

I’ve been investing in stocks for just over three years and I am up 48.92% as of today. I’m not saying this is always how it works because I know the stock market is risky, but it’s what I’ve been able to achieve by following the above strategy.

As a side note, I am not a professional stock investor or financial advisor and am not providing financial advice. I’m just sharing what has worked for me. I’d like to hear what’s worked for you or what questions you have about investing in stocks; share in the comments below!

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