Eight Steps to Building a Solid Stock Portfolio

Easy access to investing information and thegeneral investing information, market updates, stock
availability of online trading has made life much morepickers, stock ratings, watch-lists, portfolio managers,
enjoyable and less costly for do-it-yourself investors.charts, share indexes, newsletters, alerts and model
The Internet has brought the "trading" desk toportfolios.So, how can you structure a stock portfolio
millions of households and it is now possible to buyto maximize your wealth, ensure your peace of mind,
and sell shares, options, warrants, interest rategive you total control of your investments, be easy
securities and managed funds from your own home.to manage and give satisfaction?
All you need is a computer and an internetHere is a recommended strategy that has worked
connection. In addition, you can do your ownwell for many do-it-yourself investors:1. Subscribe to
research on a particular company or fund manager asa well respected investment research website
well as finding out what some stock brokers arededicated to analyzing financial information for
recommending to their clients. Much of thisinvestors. They are independent from companies
information is free or available at a reasonable costthey list, do not receive commissions or brokerage
and you can save yourself hundreds, or evenand rely solely on investor subscriptions for income.
thousands of dollars in fees and commissions everyThey have to give their subscribers quality
year via the internet. Rather than go through a fullinformation to maintain subscriber confidence.2. Look
service stockbroker or investment advisor, why notfor the model portfolios they have developed and
give it a try?When building your own stock portfolio,study the methodology they have used to create
here are some pitfalls you need to avoid!While youand maintain each portfolio.3. Read the research
can find a plethora of good information on stocks,reports supplied for each stock and study the graphs
you can also find very poor information. Each websitesupplied for price movements and trading volumes.
claims to have the latest hot picks or the "top ten"Get a good feel for both the long term and the short
stock buys and often they contradict each other.term trends of the stock.4. Test each portfolio within
Who do you believe and what about the scams?Youa designated test period i.e., one month, one quarter,
will undoubtedly come across websites and chatone year etc. Depending on the website, you can set
rooms that give investment advice or tips aboutup each of the model portfolios in a free portfolio
investments, but many of these are not qualified tomanager provided on the website with unlimited
do so. The information may be wrong or misleadingstocks. Set a starting date for a test period where
and some websites even repeat incorrectyou "buy" stocks listed in the model portfolio at the
rumors.There is overwhelming evidence that you willclosing price for that day. Make sure you include
not become rich by listening to the advice of others.brokerage as it is part of the cost base for the
As an investor you need raw information, notstock. The website should either maintain up-to-date
recommendations. You would not buy a car just byor 20 minute delayed stock prices, so a running
looking at it...nor should you buy a company's stockbalance can be maintained for the profit/loss for each
without doing significant research. There is no pointstock over the designated period.5. Compare each
trying to take control of your finances if you areportfolio's published results with the results that you
going to rely solely on a "tip" from a newspaper or ahave achieved in the portfolio manager. They should
broker or an internet chat room. It is true thatagree with each other when the same stocks are
someone may know more about a particularcompared over the same time period. Your testing
company or stock than you, but they could easily beshould develop a level of confidence in the model
wrong - so do your own homework!You need to beportfolio.6. Determine the best model portfolio for
certain that you have sound reasons for investing inyou to use. You can do this using the last the last
a particular company. Does the company have anthree months of stock price history or perform a trial
instantly recognizable name? Do you understand whatevaluation for the next three months of future
the company does? Do the products or services ofprices. You can use one of the existing model
the company stand a good chance of being in highportfolios or create your own from the stocks
demand in a 10, 20 or 30 year time frame? Does itselected.7. Subscribe to an online share broker
have a management team that moves with thewebsite and begin trading.8. Monitor stocks daily and
times and is innovative, yet keeps a firm grip on thereview the performance of your actual portfolio
company's finances? Most of this information isagainst the model quarterly.You should take care to
available in a company's Annual Report, but makeevaluate the methodology used by the research
sure that you read it with a degree ofwebsite to develop the model portfolios. These
skepticism...most reports are written to promote theportfolios are designed by research firms to provide
company.In the Annual Report, the financialsensible medium-term portfolios that make it easy
statements, the balance sheet, the profit & lossfor investors and financial planners to replicate. You
statement and the cash flow statements are veryneed to understand the research methodology and
important. They are important because they will helpdevelop a level of confidence in it rather than just
you assess if the company is providing value for yourblindly accepting the published results of each
money. You are going to be buying stocks at aportfolio. You do not need to become an expert in
certain price and you will want to make sure thatmethodologies.Building a share portfolio that meets
you are not paying an excessive amount. Theyour investment objectives will substantially build your
financial numbers give you a snapshot of the financialwealth over a period of time. You can also save
structure, strength and growth rate of the company.money in commissions and fees, have peace of mind,
This type of analysis is often called fundamentaltotal control over your investment and gain a real
analysis, and also includes analysis of the economysense of satisfaction.As a final word of
and industries related to the company.Keep in-mindcaution...nothing is for certain in this world except for
that the historical and present prices of a stock holddeath and taxes. This also applies to the stock
clues to the future price. In practice, most analystsmarket. Be prepared for some ups and downs and
use fundamental analysis for short and long term buybe ready to sell stocks to cut losses. If the core of
sell decisions and use technical analysis to confirm theyour portfolio is made up of stocks that have strong
decision.Internet websites are a great place to collectcapital growth and a reasonable dividend you will do
information about companies. Naturally, a companywell overall. Have "at it" and good investing!Eri
owned website will attempt to portray the companyRahman is the owner of a fine resources for free
in the most sympathetic light. Depending on howtraining and education in stock trading. He also
serious you want to be about investing, it is advisablemaintains a very useful resource for smart
to either visit or subscribe to investment researchtraders.There is no doubt about his experience in
websites. Research websites are valuable tools forstock and options trading, since he is a daily trader.
any investor and provide company reviews, give