Successful investment strategy for beginners - 3
Anyone considering investing must understand the concept of time value of money. A seemingly simple idea that has profound impact on capital. It suggests that the sum of money that is available at this moment has more value than the same amount available a month/year from today. This is simply because the amount available today may yield a considerable sum in interest or profit if invested over the period.
Investment egg-timer
Even a savings account returns small interest on savings over a period, however if the same amount is invested wisely, the investor may receive significantly high returns (time value) from it. The need then is to select the investment vehicle with necessary due diligence. This process of selecting a financial instrument is not entirely different from choosing a quality appliance or gadget. Both demand a thorough analysis of available options. However, since some investment options, such as stocks, vary in price regularly, they need additional follow up. For example, at first glance a company's prospect may suggest it to be a good buy, but further analysis of its figures may reveal that a better (lower) price deal may come about at a later date and is worth the wait. In general, such timing in the stock market is considered difficult to achieve. For this reason, it is recommended to approach investments with a good amount of preparation. A must-have for such preparedness is a detailed watchlist of prospective investments, that captures -
1. name of investment
2. type of investment
3. date when researched
4. price when researched
5. target price
6. expected date of breakout
7. description
A majority of investment websites offer free online watchlist feature to their registered members. These however allow very basic information to be recorded and are limited to equities. Recording details such as the research date and price helps in monitoring price swings at some later date. 'Expected date of breakout' is useful in recording the date when the target company's plan or project may yield result. Monitoring these additional details is akin to having an investment egg-timer, that alerts when investments are ready for deploying or redeeming.
The investment egg-timer can easily be created using a spreadsheet program, such as OpenOffice Calc or Microsoft Excel. A tutorial on creating auto-updating stock tracker was published on tracenotes earlier. The egg-timer can be created by following the steps mentioned in it. The article is available here.
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