You’ll never score a goal if you aren’t charging for the end zone. If you are consumed with Apocalyptic visions every time the quarterback steps back a few feet in negative territory before throwing the touchdown pass, you won’t be running to your mark to catch it.
When you are on a rollercoaster with as many ups as downs, if you set stop losses, you are losing every time the market pulls back, which is often. This is a losing formula. If you set capture gains, you are winning every time the market rises, which is just as often as the pullbacks! This is a winning formula.
Below are five easy steps to winning in your investments.
- Pick a Winning Team
- Employ a Winning Game Plan
- Be a Patient Buyer
- Capture Your Gains Early and Often
- Limit Orders: The Key to Profitability in Volatile Markets.
Pick a Winning Team. A big component of a winning team is making sure that you have the right athletes on the field. You don’t want your kicker playing linebacker, or your quarterback on defense. The winning strategy for your nest egg is different than it is for individual stocks. Individual stocks are not “money while you sleep.” They require babysitting. Conversely, some of the large cap funds you want to purchase for stability in your nest egg would be a bad investment if you are looking to maximize short-term gains. Knowing your Jabba the Huts (that stabilize your portfolio) from your Hares (that can score gains) allows you to know which funds to buy for marathon performance and which companies are more likely to win in the short run.
Employ a Winning Game Plan. A great nest egg strategy includes the following:
- Keeping a percentage equal to your age safe.
- Knowing what is safe.
- Diversifying your “at risk” assets by size and style.
- Adding in hot industries.
- Avoiding the bailouts.
- Rebalancing 1-3 times a year — preferably using limit orders.
Be a Patient Buyer. Picking a great company or fund is the second step in the 3-Ingredient Recipe for Cooking Up Profits. (The first is getting more financial literacy, money knowledge and wisdom.) It is just as important to follow the third step — “never pay retail.” Be sure to buy your stocks and funds at a good price. At minimum, check out the 52-week high and low. Other considerations include seasonal and annual trends, price to earnings ratio and earnings growth.
Capture Your Gains Early and Often. As you’ve seen in the chart above, the markets are very volatile. Today’s profit is tomorrow’s loss. A shot fired in Greece or Syria makes the markets tremble in North America. Even great companies, with long-term potential, have very large swings in their 52-week highs and lows simply because the market itself has been on a rollercoaster ride. So, rebalance your nest egg at least once a year and adopt a strategy of taking your profits early and often.
Limit Orders: The Key to Profitability in Volatile Markets. One of the best ways to ensure that you are buying low and selling high is to employ limit orders. When you are evaluating a fund or company you wish to own, be clear about the price you wish to buy it at and the profits you are hoping to see. Use limit orders, and you are released from the burden of watching the markets incessantly to hit the prices you desire!
About Natalie Pace:
Natalie Pace is the author of You Vs. Wall Street. and Put Your Money Where Your Heart Is, and the founder and CEO of the Women’s Investment Network, LLC. She is a blogger on HuffingtonPost.com, and a repeat guest on national television and radio shows such as Good Morning America, Fox News, CNBC, ABC-TV, Forbes.com, NPR and more. As a philanthropist, she has helped to raise more than two million for Los Angeles public schools and financial literacy. Follow her on Facebook.com/NWPace. For more information please visit NataliePace.com.
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