How to plan for 2011 stock investment

Do you know what is a habit that is common to good investors and good batsmen? Well, just like Sachin Tendulkar periodically reviews his performance, technique, form, innings that clicked and those that didn’t, good investors also do the same about their investments. So with 2010 ending, its timely for all investors to review their performance and technique over the past 12 months, so that one can prepare for a good investment innings 2011.

Just like in any review asking the right questions matters, so too here. Hopefully, you will find that the following 5 sets of questions can help you build on your successes and learn from your mistakes.

1. Did you stick to a chosen investment philosophy during the year, or did you go in and out of different ways of investing? Were you the buy and hold type, or were you a day trader? Please recognize that they two require very different mindsets and risk appetites.

2. Do you know what worked for you in 2010? Why? If you cannot identify this then chances are that you just got lucky with your investments, and please recognize that there is an equal chance that this luck might not re-appear in 2011.

3. Do you know what did not work for you and why? If you have not yet done a post-mortem of where you failed, you run the risk of repeating the same mistakes in 2011, and obviously suffering the same consequences.

4. What prompted your buy and sell decisions? Whether it was mutual funds or stocks, is there a pattern to when you buy or sell? Are you buying too early and selling to late? Does your SIP (where you invest some money periodically) make sense? Or, are you buying and selling when your neighbour or colleague gives you a tip, which could be nothing more than an ill-founded rumour?

5. Did you review your portfolio periodically and conduct some kind of risk management? Or, were you totally blind towards the market after you put in the money. Markets move constantly, and if you are not regular in reviewing your portfolio, at least every month, you might not be happy with the shape of your portfolio.

The more that you can learn from your investing activity in 2010 and apply these learnings to 2011, the more rewarding you will find your wealth creation efforts to be. Happy Investing!

 

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