There are two key investment strategies that all folks need to have, that are obvious, but rarely ever spoken about. The second strategy is the one that most folks seem to forget about.
A Buy Strategy
Why are you buying? What is the reason you are investing? Is this for a retirement fund, emergency fund, or just savings in your TFSA ? You need to answer that question and that is the cornerstone of your buy strategy.
When are you going to buy can be important, but market timing isn’t going to work out. When are you going to start investing is more important in your buy strategy.
What are you going to buy? Stocks, mutual funds, index funds, ETFs, and GICs are just some of the investment vehicles you can use to invest your money. Depending on what you buy, you will then need to think about how often and when you buy.
How much are you going to buy? How much money do you have to invest? Another important aspect of your buy strategy.
The other aspect of your key investment strategies is one that far too many folks don’t have.
A Sell Strategy
When are you going to sell this investment? I have asked many folks that question, and have received some very vague responses. Unless you are buying something designed to be held forever, you are going to be selling this investment, so you had better have an idea of when you want to sell.
Are you going to ever sell? If you are buying a dividend paying investment or something that pays out regular interest payments, you are going to sell this investment some time. Why you are investing will generally be a key part of the sell decision. If this is for a retirement savings account, are you going to worry about selling before you retire?
What is the lowest price before you sell? What is the max price before you sell? These are the questions to ask if this is a short-term or risky investment. If you have a short-term investment goal, and it is reached, you are going to want to sell. If the investment suddenly goes in the tank what is the lowest price you are willing to hold onto the investment? Wish I’d had that with Nortel, didn’t and I held it until it was worth nothing (well 100 shares of it).
Your Key Investment Strategy is your Sell Strategy
It is relatively simple to get into investing, but if you don’t have a sell strategy, you will end up making uninformed and quick decisions, which is not in your best interests. Your key investment strategy is your Sell strategy.
I knew many millionaires “on paper” in my life, but not many of them are still millionaires today, because they didn’t know when to sell. All a millionaire on paper is, is someone who can’t figure out when to sell, until you execute the sell to give you the millions, you are not a millionaire.