Tuesday, December 22, 2009

Step By Step Approach To Buying Stocks

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I suggest that once you have decided on an investment strategy the next thing you should do is develop a step by step approach to buying stocks. What I mean by this is that you need to know your stock market investing strategy inside and out. You need to be the expert. One way in which you can do that is by breaking down each step of the process and create a checklist of each and every decision you make when you buy stocks. Your end goal should be that someone could sit down in your office, look at your checklist and make the same decisions you would following your instructions you put out for them.

Even though I have read several investing books that tell me how to buy stock this way or that way, not many I have seen break every single step down to the finest detail. A lot of them just lay out their strategy in general terms (the best sellers in particular) and then you have to break down the action steps. Developing your investment strategy to the smallest detail, while it might seem unimportant, will make finding stocks to buy a much easier task.

It also does a couple of other things. First, it helps you make decisions logically, not by the seat of your pants. If you have thought out every step ahead of time, you aren't put in a postion of trying to remember what step you need to take now. Many people also forget a step here or there and then get poor results and wonder why. When you follow an investing "system", that's exactly what it means -- a systematic approach where you do the same thing every time. If you leave out a step here or there, you really aren't doing following a system anymore.

If you want to learn how to buy stocks the right way, you'll take the time to master your strategy, no matter what type of investor you are. You'll take the time you need to write down your action steps and follow them religiously once you've decided on them. You'll have your step by step checklist out where you can see it at all times and not hidden out of sight.

Finally, once you've completed a complete cycle for a stock -- from purchase to sale of the stock -- review all of the steps from beginning to end to see what you could have done better and revise your checklist if needed. Once you find yourself learning from your mistakes, you'll be finding the best stocks to buy more and more often.

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