Share this Page URL

Lesson 11. How to Pick Stocks - Pg. 58

58 Chapter 11. How to Pick Stocks In this lesson you will learn to determine what you want to accomplish by investing, and which stocks are most appropriate to help you reach those goals. Determining Your Objectives Now that you have a better understanding of how all the markets work, you're probably ready to invest. Before you put one dime into the market, however, it is imperative that you have a solid idea of what your goals are for investing, how you aim to meet those goals, and what types of investments you consider acceptable in meeting these goals. This is the first step in what is referred to as investment planning. Plain English Investment planning means determining the goals you hope to achieve by investing and then deciding on the methods and vehicles that will enable you to achieve your goals. Here are some typical goals that people set for themselves: · · · · Large-scale purchases--a boat or vacation home Current financial security--a good nest egg College fund--for yourself or your children Preparation for retirement--income to supplement Social Security Your first step, then, is to determine your goal. It must be a concrete goal, or else how will you know when you've reached it? Ask 100 people if they want to be rich, and it's a pretty safe bet that 100 will tell you yes. It's also a pretty safe bet that few, if any, of those 100 people are rich. This is because people as a rule tend to think of money in such vague terms as rich, poor, expensive, and cheap. Question these same people further regarding what these terms mean to them, and most will give you a blank stare or give you a vague definition--"Rich means lots of money." But what is a lot of money? It will be difficult to determine when you are "rich" if you have no concept of what rich is. Measuring Your Objective Thus it is essential that you have a concrete and measurable goal when entering the investment arena, rather than depending on indefinite guidelines or, worse yet, jumping in and hoping for the best. For example, during my first year as an investor, I made a goal for myself of establishing $10,000 in one year through savings, investments, freelance jobs, etc. I didn't make my goal, but I came close. Two months into the second year, I did finally reach that elusive $10,000 goal. Only by having that measurable goal, however, did I know during the journey to $10,000 how I was doing, when I