Add Value to your Savings by Investing in Blue Chip Stocks
Add Value to your Savings by Investing in Blue Chip Stocks
No one cares more about your hard-earned money than you do. The professionals, be they your bank or insurance company, may make you some money but if they fail they are unlikely to suffer. If you want to protect your hard-earned cash, you will have to get involved and take matters into your own hands. The internet has made it possible to get the information that was previously only available to professionals. Investing in stocks is now relatively easy and you can check out companies simply by going to the financial sites and getting the information and advice you need.
If you stick to blue chip companies, your returns may be lower than those from small companies but your risk will be less and you will still participate in the ongoing economy. More product variety and wider market coverage as well as deeper pockets make large companies safer and able to withstand unexpected events.
Just about every finance house as well as the press and news media cover large companies so you are likely to get to know what is going on and be able to take action in good time.
You can set limits on both the down and upside, in order to discard laggards and to take profits at the top end. You should also keep at least 20% to 30% of your investment capital in cash to be ready for any unforeseen opportunities. Avoid buying and selling just because a share price has changed.
You should list your holdings in a spreadsheet and record prices so that you can follow performance in absolute and comparative terms. You could even write a monthly report to yourself stating why you bought each line, in order to check that your reasons are still valid. Record and analyze any deviations from expectations just as you would do if you were running a business. That way you can fine-tune your actions for the coming month.
It is best to invest in a sector where you have direct knowledge or one where information is easily attainable. You should also consider the company you work for because you should have a good idea of its prospects. Key data on each company such as the price to earnings ratio and the earnings per share as well as debt and dividends should help form your investment decisions.
Government changes, new tax and spending policies, interest rate changes, inflation, currencies, raw materials, and world events all have an impact on stocks. Floods, hurricanes or earthquakes will affect insurance companies. You need to do your homework and check on companies' financial strength, the management, market potential, past performance, new products, competition and their leadership position within their sector.
If you wish to benefit from growth in emerging markets then you have two possibilities. You find either a unit trust or mutual fund specialising in them, or you select a company that is trading in these markets and you ride piggyback.
Technology companies are very exciting but also risky. Do not buy at very high prices with respect to their potential earnings and end up paying for the progress out of your own pocket.
If you don't want the bother of managing your own portfolio and you prefer to use financial advisors, make sure that their priorities are your priorities. You still need to follow up and check their performance.
Just consider your holdings as an orchard where you pluck the fruit. If a tree falls ill, you take it out and plant a new one.
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