12 Techniques In Drawing Up A Stock Investing Business Plan

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.