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How to set up a share portfolio

Thursday 20 August 2015

Once the equity investor decides on a stock, the the question arises, when and how to enter the order. This is where opinions are differ.


I bought my first stock 43 years ago. From of the many errors that I made - especially in the early years, I have learned the following.

In the most diverse market phases of extreme bull markets, long and boring sideways market movements and deep bear markets, I have repeatedly validated my entry method. Here are, in my opinion, some proven steps:

  1. Never buy all the shares at once.
  1. Buy the first tranche at-the-market, without setting a limit price. Now you are sure to secure your position. Otherwise the risk is too great that you will not acquire the shares due to a misplaced limit.
  1. The second and third tranche purchases are done using good-till-cancelled limit orders.
  1. After that you give the position some time, and only work on it after waiting at least six months before entering further buy orders. This is one way you can prevent buying the entire position in one market cycle. 

An important aspect I have often observed when buying shares:

 

If you have made up your mind to buy a stock, you should never be influenced or be swayed by price movements in the market. As one may, for example, be with news on the TV about world affairs, economic forecasts and statements by experts. The purchase order must be placed on the stock exchange. The setting up of the equity position starts. This sounds obvious and simple, but you need strong nerves and often years of practice.

 

Enjoy building your share portfolio.