As a DIY stock market investor, you don’t just buy stocks and forget about them. You need to keep your eye on your investments and be able to make timely decisions about buying and selling of stocks, so as to grow your portfolio. Keep in mind that trading shares on the stock market is a risky business. You may win some, you may lose some, that is why your active involvement is important.
If your broker does not send you regular statements about the value of your portfolio, then you can create your own statement through a simple spreadsheet. Every time you buy a stock you enter in your spreadsheet the date, the quantity and the price you paid. You can then track your values by checking prices on the botswana stock exchange website on a daily, or weekly, or monthly basis. At the end of every week you enter the closing prices against the stocks that you hold. You can also create a percentage tracker in your spreadsheet, which will help you to make decisions quickly. To profit from your portfolio you will need to decide when to buy and when to sell, keeping your broker and financial planner close by.
Seasoned investors will tell you that you should buy your stocks when they’re low and sell them when they’re high. When you first buy a share, you have no way of knowing whether it is as low as it will ever be, or it is as high as it will ever be. You may buy it today, but find that it is still falling and has not reached its bottom yet. If you are a value investor you may choose to ignore daily movements and focus on weekly or monthly movements. But if you are a short term investor or day trader, then of course every move is important. Remember that there are trading costs every time you give your broker an instruction to buy or to sell. If you trade too frequently within a short period, you had better be dealing with large volumes so that your gains are not eroded by trading costs.
After you buy a stock, it may take a little bit of time to find stability in a new direction. If it’s a blue chip company and according to your homework - which I presume you have done - there’s nothing much to worry about, and there’s no adverse news about the company, then you may hold and wait for the stock price to bounce back if it’s been falling. A sell decision can also be tricky. You may sell because you believe it is as high as it will ever be, only to find that it is still rising.
You may want to create some rules to follow. You can set a stop loss when you buy a share. This means you decide how much money you are prepared to lose on that trade. If you buy a share at five pula, you can set a stop loss at say, four pula fifty thebe. This means, should the price of this share fall to four pula fifty thebe, you will stop your loss by selling it at that time, if you believe or indications are that it will keep falling. On the flip side, you can also set a profit taking margin. You buy the stock at four pula, and you set your profit taking margin, say at six pula. If the price reaches six pula, you shall have made a profit, which you can take out by selling just enough shares to equal your profit, and leave the rest to keep growing.
You can re-invest your profit in another share that you had kept your eye on to create more diversity in your portfolio, and to grow your portfolio.
There is more to the business of share trading, which is why you should always seek advice from trained professionals even as you continue to educate yourself.