Having established your goals, allocated the proper time frame for those goals, become aware of your risk tolerance levels, and drafted an asset allocation platform - you are now in need of a selection process to assist in choosing your personal Types of Investments. Here follows the Selection Process for EQUITY and FIXED INCOME INVESTING
- EQUITY - STOCKS
Depending on TYPE of EQUITY, desired objective and tolerance level of the investor, there are BASIC criteria for selection of individual stocks including, but may not be limited to, the following: value added, fundamental soundness, new product or management change, earnings/price momentum, supply/demand of the shares, relative strength of sector/stock, and technical timeliness.
Risk management is used in an attempt to help reduce losses and try to maximize gains. Stop losses may be used.
MY ANALYSIS of Equities include:
FUNDAMENTAL VALUES - understanding earnings, sales, P/E, debt ratio, management, consumer acceptance, and demand for products are all a part of the general basis for stock buy or sell criteria. However, a too much overlooked "other half " of the stock analysis equation, and, which some consider to be the most important, is:
TECHNICAL ANALYSIS - we use Dorsey Wright & Associates, Wm. O'Neal and other technical services for charting the movement and price patterns of all stocks.
These TWO analyses go hand in hand in making decisions of every buy or sell of an individual stock.
- FIXED INCOME - BONDS
Depending on the DESIRED RETURN, Fixed Income investors and Fixed Income investments differ widely from their equity counterparts.
MY ANAYSIS of Fixed Income include:
CREDIT WORTHINESS of the issuer in fixed income investing is uppermost in the selection process.
MATURITY of the issue, call features and its yield parameters along with the conservative investor's holding time-frame are all important. HIGHER YIELDING bonds are for the more risk oriented investor.
Moody's, Fitch and Standard & Poor's are well respected rating services for bond and debt issues that assist us in investment selection.
3. BALANCED OR BLEND - MUTUAL FUNDS
Depending on one's COMMITMENT TO PORTFOLIO STRUCTURING ABILITY, tolerance levels, time frames, goals, and, of course, risk-to-reward acceptance will determine the "balance" of investment strategies. This balance or blend can be conveniently achieved through mutual funds.
Various types of investments in these three strategies are discussed under
TYPES OF INVESTMENTS