18 Dec | Which Shares Should I Invest In?
Based on a fair bit of visitor feedback, I began to pen a piece on how I go about creating a pool of potential shares to invest in. Nothing to do with the actual final homework and selection process, just the first stage where I add to a list of potentials. Initially, it was going to lead to a couple of handy methods I use to steer me to what’s currently on the investment boil. A sort of road-map of where those in the know are flocking on AIM and why.
But it ended up being a bit of a behemoth of an article talking about investment philosophy, risk versus reward, opportunity cost, all a bit of a bore really.
So back to plan A, a short sharp list that won’t test your patience too much. This article is predominately aimed at those starting out on their investment journey, so apologies in advance if it’s old information to the old hands.
If you like your equities with the potential of doubling in days rather than decades (and the obvious inherent risk of bankruptcy that bounces along besides AIM investments) then read on.
Here’s a couple of methods I use regularly to add to my pool of potential purchases, a couple of ways to isolate those shares that are on the move. Now just because the mob is investing doesn’t mean you should follow them in blindly without due diligence. After you’ve uncovered them, then it’s time to figure out why they’re moving, do plenty of your own research, weigh up the pros and cons and decide whether they fit in with your own investment philosophy and if you think they warrant a punt, then and only then pull the trigger and buy some.
1. I tend to visit the Interactive Investor home page almost daily. I scroll down to the bottom of the page and check out their list of Most Active Discussions. Nowadays with information dissemination the way it is, those in the know attract those in the know. If something’s hot, you can back it in it’s being talked about. And when an equity is being talked about big time, it sneaks its way onto this list. I believe the ADVFN home page has a similar list. Now usually there’s a Barclays or a BP in the mix but there’s also a bunch of AIM shares that are either adding on the pennies or taking a dive or preparing to do one or the other based on upcoming news or results. Have a browse through the list, do some digging and if something tickles your fancy then add it to your list of potentials…
2. After spending a little time on the bulletin boards you tend to come to respect the postings of certain members and steer well clear of others. I have a group of about ten bulletin board posters who I follow on Interactive Investor, whose investment philosophy tends to mirror my own. They like their risk and chances are when I come across a new potential investment they’re already there on the bulletin board, commenting away in a timely and constructive manner. And while it is always necessary to do your own homework, sometimes these guys and gals have done a lot of the hard yards for you. Although you’ve got to take everything written on the BBs with a little salt, these investors usually require just a grain, not the whole shaker. On Interactive Investor, when you come to respect a poster’s authority, click on their name and then add them to your favourites. By visiting your account on Interactive Investor and clicking on favourite investors you can get a bit of an overview on where those respected few are posting, what they’re following and where their cash is invested.
3. If you like things spelled out for you and digging’s not really your thing, get hold of a tip sheet. We’ve listed a few share tip sheets on Investor Trader but my personal favourite is Small Company Share Watch. The guys behind SCSW have really done their homework when it comes to smaller companies and they share the goods each and every month.
4. Due to the volatility inherent in AIM shares it’s handy to know you’re making decisions based on live prices and not dealing with delayed data. Twenty minutes can play witness to 10% gains and losses on AIM, so get yourself over to SharePrice.co.uk and open a free real time portfolio tracker.
Remember, we’re pretty exclusively dealing with AIM shares on Investor Trader, so these are a couple of little methods and tips that work for me. Once you’ve isolated a share that could be a potential investment, that’s when the real work should begin before departing with your hard earned money.
Thanks again for dropping by and Merry Christmas. Being the season of giving why not drop on over to Kiva and give a leg up to a third world entrepreneur.
May your portfolios be a sea of blue in 2011.