Investment Ideas for a Tough Market; Part I

Investment StrategiesThe current investment climate has improved from a year ago, but there continue to be some concerns relating to the speed of the economic renewal in the U.S. and overseas.

I’m not a backer of chasing gains. Success in this type of market will continue to require patience and capital preservation. The last thing you want to do is to chase stocks higher and leave yourself vulnerable to a major downside move. The risk is there and you need to be aware of it.

If you don’t have a lot of money to invest and you can’t afford to lose in the stock market, your options are most certainly limited. Of course, nobody wants to lose money speculating in the stock market, but the reality is that it is part of the business. Lose the money now and you will be left out later on.

Make no mistake about it; it is a lot easier to spend or lose money than it is to create it. If you have already accumulated some wealth, you know this to be true. If you’re trying to save a bit of cash, you also know this to be true.

There are plenty of other worthy things to do in this world other than speculating in stocks. Buying and selling stocks is not for the faint of heart, so if you can’t sleep at night because you are worried about your portfolio, you may want to consider another kind of business venture. Think about what you are trying to achieve by investing in

One of the most important requirements for being successful in the investment business is to develop your own approach to the market. You must approach the stock market in a manner that only you are comfortable with. Some people are good at short-term trading, while others excel at long-term investing. You can’t use anyone else’s “system” as your own. You will only be successful if you take in as much information as possible, try different approaches, and settle on a routine that works for you.

Okay, so you don’t have a lot of money to invest. Welcome to the vast majority of people in this world. This doesn’t mean, however, that you can’t accumulate a small pool of capital with a little effort.

The best way to get a small pool of capital together is to start saving on your own.

Take five percent from each of your regular paychecks and put it away every month in a money market fund. This isn’t money you need to live on; this is your savings for a speculative portfolio of stocks. This is the money that you can afford to lose.

Maybe you’ve already got a small equity portfolio. Stick with adding five percent of your regular paycheck to this portfolio. Soon, you’ll have a decent amount of money available to you to take a responsible approach to stock market investing.

I will look at other investing ideas in the upcoming columns, but, for now, ride the upward wave and make sure to take some profits along the way.