How to decide how large or small your next investment step shall be?
Every time you want to increase your investments in the stock market, you ask yourself how large or small that next investment will be and in which markets to invest. Do you have a proven system for this? Our community members have asked us how we make these decisions. Here we will share our approach and attached to this blog post is our exclusive Next Step Tool, free for you to use.
It is not possible to give a universal suggestion for how large or small to make your next investment step. Every person is in a different situation. This article focuses on the situation that you want to increase your investments. Another time we will look at how to decide how to reduce your investments in the stock market.
6 Questions for you to answer
The following 6 questions are essential for you to decide how much you shall invest when you want to increase your investments:
- What is the total amount of money that you have available for and are comfortable with to invest in the stock market? This amount includes the amount that you have now already invested in funds and stocks. Note that we suggest only investing your savings that you do not need for another 5 to 10 years.
- As a percentage of this total amount asked for above, what is the maximum amount that you are comfortable with to increase your investment in one step with? We use normally steps of 20% of the total amount that we have totally available to invest in the stock market. What percentage are you comfortable with?
- What is the minimum amount that you want to invest each time that you buy for example an index fund? By setting a minimum amount, you avoid that you’ll be busy with placing relatively small orders compared to your total investment potential and you’ll keep a better overview of your transactions.
Our minimum order values are between the 3% and 7% of our total amount that we have available to invest. What is good minimum amount for you?
- What is the maximum exposure that you want to have with your investments to each major market region in the world? Which percentage of your investments would you want to have as a maximum in the US market? Which percentage in the European markets? Which percentage in Japan? Etcetera.
The sum here can be more than 100%. It is just to set yourself a limit that you do not get over-exposed to a certain market. This is no rocket science. Just define a rough maximum exposure percentage that you are comfortable with for each market region.
- How much have you now invested already in each of the different regional markets? You can only decide how much more to invest in a certain market if you know in any case what your maximum exposure to that market shall be and how much you have invested already.
- On a regular basis, you would want to decide if you want to increase your investment in the stock market or not, if you could; and if so, in which markets you want to invest.
At Stock Trend Investing, we make this evaluation once per month, and we use our trend expectations for the different markets to make this decision. We only invest when we have identified a clear trend up in that market.
The Next Step Tool that we have developed and are sharing with our community members, can help you in translating your answers to the questions above into a personal suggestion for your next investment step.
The tool is built in Microsoft Excel and is very simple and self explanatory.
In one of our next blog articles we will give anyhow a detailed explanation how to use it exactly.
Get the tool
You can download the Next Step Tool at the bottom of this blog post. The first file is in the new MS Excel format. The 2nd file is in the MS Excel 97-2003 format.
We will also distribute this tool in one of our next email newsletters. You can sign up for this free newsletter via the link or form in the right column of our website.
Feel free to contact us with any questions or comments on the Next Step Tool via the contact form or by placing a comment at the bottom of this blog article.
|Next Step Tool Stock Trend Investing 101231.xls||36.5 KB|
|Next Step Tool Stock Trend Investing 101231 C.xls||36.5 KB|