Goals
The goal of this exercise is to find a low risk method of investing in stocks that have a decent potential for growth. All of these stock picks will have strong financials that should represent well run companies that can withstand downturns in their industry or the economy.
Conservatively run companies are great investments for limited downside (loss) but if the stock never goes up in value, from a risk standpoint you'd probably be better off in bonds or money market funds. Therefore, we also need to find which of the strongest companies have potential for growth. Hopefully this will translate into stocks that increase in value.
Value investing typically has a long term investment strategy, so we will attempt to do the same. I'm envisioning a 6-18 month holding period for each stock, but keeping in the back of my mind that 5 years is ideal. This should help us avoid situations where we panic.
Also, one advantage of long-term investing is that it reduces churn (which only benefits brokers) and tax events (which only benefits the IRS.)
I will be submitting my picks on the first of each month, and I will be presenting several variants of my methodology, in an effort to see which offers the greatest return.
We will also be tracking our performance against the S&P 500 since that seems to be the standard that most people like to use. If we can't beat the S&P consistently, then this method is pointless.
I will try to work in a little technical analysis, so that I can better time the purchasing of stock. Since I will be vetting all of these stocks with a value investing approach, and looking to hold long-term, I will be avoiding much of the risk of technical analysis. However, if a stock is trending down, I would probably be better off waiting until the trend ends, before buying. (I figure if I like ARO at $21, but it's trending down, I can improve my return by waiting a month until it's at $19.)
Conservatively run companies are great investments for limited downside (loss) but if the stock never goes up in value, from a risk standpoint you'd probably be better off in bonds or money market funds. Therefore, we also need to find which of the strongest companies have potential for growth. Hopefully this will translate into stocks that increase in value.
Value investing typically has a long term investment strategy, so we will attempt to do the same. I'm envisioning a 6-18 month holding period for each stock, but keeping in the back of my mind that 5 years is ideal. This should help us avoid situations where we panic.
Also, one advantage of long-term investing is that it reduces churn (which only benefits brokers) and tax events (which only benefits the IRS.)
I will be submitting my picks on the first of each month, and I will be presenting several variants of my methodology, in an effort to see which offers the greatest return.
We will also be tracking our performance against the S&P 500 since that seems to be the standard that most people like to use. If we can't beat the S&P consistently, then this method is pointless.
I will try to work in a little technical analysis, so that I can better time the purchasing of stock. Since I will be vetting all of these stocks with a value investing approach, and looking to hold long-term, I will be avoiding much of the risk of technical analysis. However, if a stock is trending down, I would probably be better off waiting until the trend ends, before buying. (I figure if I like ARO at $21, but it's trending down, I can improve my return by waiting a month until it's at $19.)
posted by PM at 1:12 PM
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