I’m learning to invest in the US stock market, but using an on-line simulation site, not the real thing. The reason is because I don’t have sufficient funds to invest effectively in the US stock market.
My plan is to buy at most 10 stocks in one year with a starting capital of $100,000. So the plan is to spend $10,000 on each stock. Every month, I will purchase at most one stock every month until I have 10 stocks in my portfolio.
My strategy is buy and hold for one year. That way if it were real, the tax implication would be less as the purchases were intended for long term investment. It would also require less time and efforts as compared to doing day trading or swing trading. More time would be spent on analyzing the stocks to be purchased.
Rules in keeping the stocks:
A stock will be held for one year, but with a stop-loss in place. The stop-loss rules are as follows:
- initially, the stop-loss is placed at -7% of the purchase price.
- once the stock price reaches 20% above its purchase price, the stop-loss will be moved up to 20% below its highest price. That way once a stock has risen significantly, any drop in price will not bring the position to a loss.
The buying strategy will be covered in my future blogs.
I hope it will be a useful learning experience for all of us.