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Stock Investment Strategy What Are Your Goals

June 26, 2009

Imagine an Olympic archer. He knocks the arrow, draws the string, aims, and releases the arrow as it flies straight and true into the center of the bull’s eye.

Now imagine that archer doing the same thing. Except instead of hitting the bull’s eye, he lets the arrow fly and it travels aimlessly because there’s no target at the end of the range. Did he do well? How could anyone know?

While this example may seem a little odd, implementing a stock investment strategy without goals is no different than shooting arrows with no target.

Before you get started trading stocks, you should always take time to create and/or review your goals. Having these goals will also help you to develop your strategy. Your goals will create the context which ultimately will define your activities.

As an example, let’s look at some possible goals which you might have. You could start with three short term goals and one long-term goal.

Your short term goals could be to cover your monthly expenses, to generate another 50% of income over those expenses, and to take your family on four vacations a year.

Your long-term goal could be $1,000,000 in the bank in the next 10 years.

Based on your long-term goal, you would want to develop a strategy for accumulating wealth and protecting it from excessive taxation as well as “expense burn.”

These example short term goals suggests that you will need to be an active trader and that you will need to be diligent enough to actively draw an income while protecting yourself from short term loss.

With this kind of intent in mind you can now seek out the tools that you need to always be in touch with your stock prices and be able to trade no matter where you are. You can also consult with a financial planner about asset management or perhaps you want to learn about it yourself.

What happens if you decide that the goals you set weren’t really the things that you wanted?

You simply change them. Having a goal doesn’t mean that you tattoo it onto your forehead. The most important thing is to have a starting point. Otherwise you won’t know if the goal suits you or not. Archers also have their selection of targets. It’s more important to simply get started and then develop the experience to better recognize what truly suits you.

One thing should be fairly certain though. Someone else out there has goals which are similar to yours. If they are making progress towards achieving those goals, learning about and modeling their activities is a great place to start. After all, if you wanted to be a great archer you would study other archers. As you develop your own skills you may find that there are little things which become uniquely your own, but viewed from the big picture you’re modeling the success of other people who learned how to hit the same bull’s eye.

Before you go too far down the road of developing your own stock investment strategy, take some time to reflect on and develop your goals as they relate to making money with stock. The more time up front you spend developing your goals and your vision beyond the mere activities of buying and selling securities, the easier you will find it to develop and execute your own winning strategy.

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by John Le Bleu

Written by paydayla · Filed Under Investment 

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