I believe investing should be unique to the individual. Investing is something you have to know, not just do. But knowing takes your time and your time costs money, so I decided to write a brief article that can help you understand your investment goals and determine where to put your hard earned money! My goal of this is to share my investment opinions and values, not to recommend the next greatest stock. This article will only focus on a basic stock investing strategy; I will not get into other investment vehicles like real estate, mutual funds or anything else, just straight up stock investing.

Just to set the record straight, I am not some high-powered Wall Street big shot, nor am I a day trader or a market guru; I am just some regular dude, working in software marketing that has a very specific investing strategy that works for me. Now when I say works, I do not mean I have made millions from investing, I mean I know what investments work well for me and I always know where to put my money (when I have it!). I do not put a lot of money in the market, but what little money I have had in the market has performed well (I will discuss my portfolio later). I have not been a hardcore investor of the past five years because I invested in my education, which, was the best investment I had ever made. Only now, am I at a point where I can invest more money. So let's review the dude investment strategy.

Understand your financial goals
I am sure you have heard this one several times before, but it is by far the most important step you can ever make. Why? Well, first of all, if you do not understand why you are investing, why invest at all? If you do not know where you are going, are you going to purchase an airline ticket? Of course not, that would be dumb and costly. I can babble on and on about the importance of understanding your goals for investing, but I won't. I will just make a clear statement, if you do not know your goals keep your money in a savings account or under your mattress and forget about investing in stocks.

Now if you do understand your investment goals and/or you are in the process of defining them, you are on the right track to developing an investment strategy.

What are financial goals?
Basically a financial goal is what do you want to do with your money? What will you use it for? As an example, your financial goals could be that you want to buy a house, pay for an education or save for retirement. Each of these goals is quite different and subsequently will result in differing investment strategies. Got it?

Just buy what you buy!
Once you understand your financial goals and you have determined that investing in stocks is right for you, you need to know where to invest your money.

I have one clear vision for my investment choices and they are truly unique to me. I solely buy what I buy! Meaning I only buy stock in companies that I know what they do and I faithfully use their products and/or services. Chances are if I am happy about the company's products so will 80% of the population (using the 80/20 rule). The result will be a higher comfort level for me, because I truly know where my money is. In addition, if it is a product/service that I like a lot, the chances are others will also, leading to greater overall success for the company.

Let me give you a few examples of how this works. First, think about the products and services you use on a daily basis. Make a list and prioritize it based on what you like and/or buy the most. Then, look at each of the company's on this list and see if they are publicly traded. After you have composed a list of publicly traded companies, weed it down further to the top 3 or 5 favorite products, stuff you really cannot live without. Then allocate the money you would like to invest evenly over these stocks.

Depending on your investment strategy, hold onto to your investments, don't buy and sell based on market fluctuations or analysts recommendations. This is my general rule; however, there will always be circumstances where it is wiser to get out of a stock than to hold it. Like the executives are under investigation or something like that. Just remember there are no guarantees and sometimes you will make a poor choice, even in companies you believe in. However, you minimize this by buying stock in companies you have confidence in.

Additionally, they opposite strategy should be used. You should sell what you sell. Basically, if you purchased a stock based on the above strategy and you no longer like that product or service, sell the stock! Chances are if you had a bad experience, others will have also. Even if the stock has been performing well, sell it! You never know you may be one of the first to know a flaw in this company.

Should you diversify?
Absolutely, although I believe that you should never ever buy a stock you do not know for the sake of diversification, it is also important to make sure you do not put all of your eggs in one basket. The chances are that if you buy what you know as described above, you will unknowingly be creating a nicely diversified portfolio. This is because you will most likely not be buy competing companies, but companies that offer 2 entirely different products/services. Let's say, for example, that you own 2 computers from 2 different manufacturers and you like them both so they both make your top 5 list. You should not buy stock in both companies, just focus on the one you like better. Buying both stocks will limit your diversification and it really just doesn't make sense.

Outside of this, another way to make sure you diversify is to really look at the products and services you buy, look beyond what is in front of you, think about your daily purchases for things like fuel, food, electronics, media, coffee and the like. You will quickly see that you consume a huge variety of consumer goods. Next >>