Stock investment project - Essay Example

Stock Investment Project The main purpose of this project is to acquire an understanding of the investment by being an interested participant. One can sell, but, and buy on margin mutual funds, corporate bonds, government bonds, and index options. It is important for everyone to measure the performance of his/her portfolio to evaluate whether excess returns pay his/her effort and time (Dorsey 42). The owner of the portfolio might be enjoying it, but it is good to know how much it cost him/her.

The investors should make a crucial decision on how frequent they monitor their portfolio. This is because the more it is monitored the more investors are driven by the market noise unlike in the long-term fundamental monitoring. The first thing is to determine how much to preserve and not put on the risk out of the 100000 dollars. At the same time, I should determine how much I would like to grow more rapidly by investing. Personally, I preserved 60000 of money through diversification for by investing in mutual funds.

The rest I took a risk for a chance of having larger returns by investing on individual stocks. I knew that every individual stock could collapse any time, but it can also grow by a greater percentage. I carefully picked stocks, which I hoped to get one that could grow for a long time beating all market. I started by picking 2-3 stocks, which had good long-term prospects. I bought few hundred shares each having equal dollar amounts (Dorsey, 72). After that, I watch them for a while hoping that the price will drop that I can buy more share at a lower price.

They dropped a bit, and I bought more shares at a lower price. Once I had put in place initial positions, I had to wait for three months. I checked positions of the companies that they still had the fundamentals they had at the beginning. I found that they were still firm and capable as I joined them. After this, I decided to invest more in 1-2 stocks, which had lagged the others to buy at low price. I went on increasing the share every 2 months until I had between 500 – 1000 shares in each stock.

By this time, I had $80000 of money with $10000-$30000 in each stock. I saw that this amount was too high for me to loose and I chose six stocks making each $5000-$15000. At this point, I started to look for other good stock to invest the remaining money. As bad things can happen sometimes, I decided to sell off some of the shares in some positions as I saw that they were too big for me to lose (Dorsey 103). I decided to put some of money on various individual stocks and add others to the existing positions.

To preserve the capital I had gained, I decided to diversify the rest of the money. On the process, I saw two companies of which I bought losing their qualities, I decided to sell them off, and put money on other upcoming companies that were aggressive. I saw the money I had were enough for me to save and even continue adding stocks to my portfolio. In my investment, I was faced with slow economic growth where I was almost pulling out my investment. Later I realized that this was the best time to buy the stocks.

This is because the prices of the stock were low. It is important to take advantage of the lower prices in the stock market when one can afford. In addition, at this situation I saw the importance of investing in different companies. This is because when one company is faced with various challenges one can still survive in the unaffected companies. As one way of diversifying, one can even purchase different mutual funds that have spread their risk in different companies. As I had known the importance of staying put even when affected by the slow economy, I decided to diversify my portfolio by venturing into real estate.

This is because I saw that real estate is an excellent investment, and I could accumulate wealth for some time (Dorsey 89). As I owned some rentals, it increased my income, which enabled me to increase my investments in other companies. With assistance from my financial planner, I was able to understand my investments well. This enabled me to have an advanced knowledge about my investments and the associated risks. In addition, my financial planner advised me to stay put even there is slow market.

This is because the share and my funds will go back up until the market and economy turn around again. At some time, the economy was expanding, and the prices of the stocks were very high. I decided to buy more stocks thinking that I will sell the stocks in the future with higher prices. This affected my investment because the prices of the stocks were much lower than the price I bought. I had to sell other stocks at a loss while other I kept waiting for the prices to increase. Economic outlook is unpredictable and sometimes I had to reduce or stop buying the stock start selling only to realize letter that the prices increased.

The companies were selling products to different buyers in different countries. This made the dollar rise forcing the buyers to spend more money in buying the goods. This will reduce sales, which will in turn lead to low stock prices. This was a loss to the owners of the shares in the companies as they were forced to sell in lower prices. In the process of the investment, I learned that ti is good to understand the financial status of the companies before buying or selling shares to them. This is because without knowledge of their status they can be driven to a state they are unable to pay their debts leading to losses to the owners of the shares.

This will force the buyers and sellers of the shares to be monitoring the status of the companies before making any investment (Dorsey 253). When it comes to the economy, it is unpredictable sometimes it can favour the investors and sometimes it cannot. This because when there are inflation or deflation the investors and companies is affected either positively or negatively. During inflation, there will be higher consumer prices leading to slow sales and reduced profits. On the other hand, during a deflation, there is a low consumer price.

This will signify decreased economic growth and lower profits for the companies. This makes the stock prices are lower making the investors to sell their shares and venture to fixed income. Reference Dorsey, Pat, The Five Rules for Successful Stock Investing: Morningstar's Guide to Building Wealth and Winning in the Market, United States: John Wiley & Sons, 2011.