Most investors fail to grasp the significance of portfolio management. Without it, investing, in general, is akin to Gambling as far as the uninformed or novice investor are concerned. However, this does not need to be the case. A little bit of the right information can go a long way in improving your odds of success. Thus, you need to have a game plan before you start throwing money into the markets. In general, 85%-90% of investors lose their money; this must occur for the remaining 10-15% to make a killing. For every dollar won someone has to lose a dollar.
Suggested Game Plan
- Divide your money into equal lots and deploy the same amount of money into each position. Always maintain some cash for those mouth-watering opportunities that come along every now and then.
- Decide how much you want to make in advance . Do not keep changing or altering the numbers.
- Decide how much you are willing to lose also; do not just focus on the rosy picture. You need to also focus on what you will do if things do not work out as planned. We generally advocate a stop that ranges from 20%-30%, with the average being 25%.
- When your stop is hit exit, exit the position. Do not think of adjusting the stops because you hope or think that the position will miraculously come to live. Hope is for fools.
- If the play is not working out, i.e. not doing anything for months, this is dead money. You have to make a decision to stay in or sell and buy something else. If you have plenty of cash then you can sit it out, but if your funds are limited you might be better of investing in another play.
- Make sure the goals you set are realistic.
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