1) Where To Start
Most
people start investing in the stock market of their country. If you are
in Malaysia, you start by investing in Bursa Malaysia stock market. If
you are in Singapore, begin with SGX stock market. Never start with
foreign markets especially those thousands of miles away. Keep things
simple and stupid (KISS).
2) How
Learn
the investing techniques before you start investing. Read good
materials, socialise with people who are more knowledgeable and attend
seminars. Take your time and don’t be too impatient on this. You need
time to build the foundation. Most people who lost took the wrong turn
investing FIRST before learning investing. It is better to pay for
learning rather than pay the tuition fees to the market. Learn as much
as you can about the working of the stock market and the basic
principals on what cause share prices to rise and drop.
3) What Stocks To Invest
There
are thousands of stocks in the stock market. Do you invest in growth
stocks, dividend stocks or cyclical stocks? Do you put money into
telecom stocks, banking stocks or plantation stocks? Many choices.
However, with a stock investing business plan in place, you decided
early on what stocks you want to invest, thereby saving you time and
money.
4) Make Use of Stock Derivatives
Stock
derivatives are names given to financial instruments such as warrants
and options. They are instruments added to the stock to make the stock
more attractive to the investors. These are complex financial
instruments that may (not) behave like the underlying stock. In the
stock investing business plan, you should AVOID stock derivatives until
you are more knowledgeable and experienced in the stock market.
5) Capital
Do
you start with $5K, $10K or $25K? Is $10K enough? A stock investing
business plan can provide quick solutions to this question. You could
decide to start small say $10k then later when you get more experienced,
you can easily top up the capital in the account. It is easier to
manage an investment account with a small capital base. And in this way
you will reduce your chance of over-trading when you are still a
beginner.
6) Strategies
There
are many ways to make money in the stock market. Which methods you will
use? Are you going to make money via swing trading, day trading,
momentum trading, scalping? Do you make use of fundamental analysis,
technical analysis or both? Drawing up a stock investing business plan
will assist you to alleviate some of these questions before you go
“LIVE”.
7) Broker
Since online
trading is popular choice of investors now, you should have no problem
looking for a broker platform that offer a low cost commission rate. Of
course beside the commission costs, you also need to look carefully at
all the tools and services the broker provides to their online
customers.
8) Account
There are 3 type of share investing accounts –
cash, credit and margin accounts. Cash account allow you to purchase
shares up to the limit of cash deposited into the account. It is a wise
way to start investing for a beginner. Cash account commission is lower.
Don’t start with credit or margin as you could end up over-trading and
do not have enough funds to pay up when the purchase is due.
9) Time Frame
Are
you looking to invest for the long-term, medium-term or short-term?
Investing for the long-term require different investing techniques as
well as different types of stocks from the medium or short-term
investing.
10) Returns?
A
good stock investing business plan will have a set of targeted returns.
Targeted returns are the key performance indicator (KPI) on the stocks
you own. Start with a conservative number such as 5% (benchmark against
the average EPF rate) and increase the rate over time. Higher returns
need to be balanced with higher risks involved. The indicator will tell
you whether you are in good shape or have to close shop.
11) Diversification
Diversification
is a very broad subject which can itself be another article. It means
how not to put all your eggs in a basket. It also means how much risk
you are prepared to take in the market. In the early stage of a stock
investing business plan, you will be confronted with the dilemma on how
much cash to put to work into the stock market. Is it 60%, 80% or 100%?
How much do you split between stocks, bonds and cash? Tough choices.
12) Age
Age
factor is an important juggernaut in the stock investing business plan.
Be realistic and plan according to your age factor. A young person age
30 can take more aggressive investing approach because he has
employment income. But if you are a retiree without full-time work you
cannot draw up an aggressive investing strategies into the plan because
you could ill afford to lose your capital.
