Confident Investing

date Nov 13, 2007
authors Deborah Owens
reading time 2 mins
  • Book Title: Confident Investing
  • Author: Deborah Owens
  • Year written/published: 2001
  • Some extracts:

confident investor…

  • you save your money for short-term needs of 5 years or less
  • you invest your money for long-term needs of 5 years or more
  • reinvest the dividends is a way to increase the number of shares that you own without spending extra to buy them
  • when compounding kicks in, wealth builds quickly

companies…

  • large-cap companies ($5b and higher): This tends to be where you find your ‘blue-chip’ companies. These are firms that have been around long enough and are established enough to have definitive market share, relatively stable profits, and often a history of paying dividends. The names of these firms are usually easily recognized and you probably use their products and services in your daily life. Eg. Coca Cola, McDonalds, Ford, Wal-Mart
  • Mid-cap Companies ($1b to $5b): You may recognise some of these companies’ names as well, but as the name implies, these firms are a bit smaller than their larger counter parts
  • Small-cap companies: (less than $1billion): There are a very small number of trades

Investment selection styles..

  1. Growth Investing:Dividends are not important. What is important is how quickly a stock is growing. To measure this you could look at things such as earnings growth, market-share growth, revenue growth or new product.
  2. Momentum Investing: A subset of growth investing is momentum investing.
  3. Value Investing:Value investing is opposite of growth. This takes patience and you have a to wait a fair bit of time to see the kinds of results

Types of Funds…

  1. Stock Mutual Funds (Growth Funds) - When you want your money to grow
  2. Bond Mutual Funds (income funds) - when you want income now
  3. Hybrid Mutual Funds (growth and income) - when you want both growth and income
  4. money market funds - when you want a place to park your money for the shirt term or as a savings account

Dividend Reinvestment Program (DRIP)

  1. involve very low fees to participate
  2. are offered by large companies
  3. allow you to particiapte if you already own shares of stock or you can start a new account
  4. allow you to set up additional investments on a schedule, of whever you have extra cash to invest
  5. use dollar cost averaging
  6. involve each company keeping rack of how many shares each investor owns