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The Importance of a Proper Investment Plan

Posted on | April 25, 2013 | 9 Comments

People that are the do it yourself types of investors inevitably fail in the long run. Actually most investor’s fail to a certain percent in the market. Investors that have a made many successful trades all have one thing in common. A proven strategy plan.

It’s not enough just to set up an investment plan in order to succeed. If you’re interested in security analysis and portfolio management, you must also be very disciplined. You are the one that controls your successful investments not the market.

Keep It Simple
As the saying goes death and taxes are the only guarantees in life. However, a successful investment strategy is also key. Most investors dislike the term “trader”. It’s not in their nature to trade their investments. Then there are investors that when they hold a trade for 12 hours or longer as a successful trade. There are no right answers or wrong answers when it comes to trading and investments. Every trade and investment is as unique as the individual placing them before you make a trade or investment your strategy must be rock solid and always be honest with yourself when making investments or trades. Always establish simple rules that are easy to follow. Try them out in a few trades or investments to ensure you have developed a successful game plan never make rules that are so complicated that to follow them is confusing. This is a game plan for failure.

The Rules To A Successful Strategy Plan
There are many companies dedicated to helping do it yourself investors develop strategies that will result in successful trades and investments. The backbone to any given investment strategy is research and planning however most investors give this part the least amount of time. Of course planning is never as much fun as trading.

1. The first tip is to allocate assets or determining how much to buy of a stock.

2. Risk Management or Exit Strategy in other words when should you exit your stock or hedge your portfolio.

3. Selecting a stock or what stocks to choose for your portfolio.

4. When to buy a stock or Entry Strategy.

Position Sizing
Poor position sizing is the main reason why most investors are not successful. This means that they make poor selections in stocks which results in unsuccessful trades. This often results in their portfolios falling apart and is virtually impossible to recover from. When you have a diversified portfolio a bad trade in one category will not affect the rest of your portfolio

A Few Simple Rules for Your Plan
The basic rule of thumb is to never have a large position or sizing as this often results in many portfolios to implode especially those without any diversification.

Exit Strategy
Develop a strategy to know when to trade your stocks. Study your stocks carefully and watch the market to know the best time to sell or trade.

Entry Strategy
Develop a strategy to know when to buy a stock. Watch the market carefully and follow the trends to know when to buy.