Stock investing "How-To"
How to decide which stocks to buy.
From our introduction to investing you decided that you want to look closer into stock investing. Here, we provide you with a simple step-by-step getting started guide to investing in stocks. In addition, you may want to get a more in depth view by reading our free Investing Handbook by subscribing to our free stock updates.
For whom is the Obermatt method?
The Obermatt method is designed to meet the needs of individual investors, as well as financial advisors. Obermatt provides individual investors with sound financial facts of a quality that is otherwise only available to financial professionals. Professional financial advisors and asset managers use Obermatt to find neglected stocks and save time by utilising our stock analysis and equity research.
If you already have experience investing in stocks, you can follow our express guide. There are also more detailed instructions below if you want to fully understand each step of the stock buying process.
- Open a trading account at a discount brokerage. (Comparison: Switzerland, Germany)
- Determine the amount you want to invest and set up a standing order on your trading account.
- Subscribe to the Obermatt Stock Update to get our latest Top 10 stock lists.
- Invest at least two to four times a year in big companies, therefore Large to XX-Large companies.
Because of all of the information available today, stock prices cannot be completely wrong. Nevertheless, stock prices will move more than you like and you will have gains and losses, sometimes dramatic ones.
Accept these fluctuations. You cannot do anything about them.
Fortunately, you don't need to bother about the ever changing stock prices if you invest for twenty to thirty years. In the long-term, the ups and downs don't matter. Also don't try to beat the market or find the best timing for your trades, because you most likely will fail at both. But by investing for the long-term, you will be more successful than a professional investor, because you will save a considerable sum in advisory fees and commissions, which means that you will have significantly more money in your stock account at the end of your savings period.
Step by step guide to self-investing: How to research stocks
Step 1: How much to invest?
To decide how much money you want to invest in stocks, you should first create a financial plan. On the basis of your income and your expenses, you determine the amount you have left to invest. A cursory overview is often enough in most cases, but it could also be a good opportunity for a complete analysis from a financial adviser. Once you have determined the amount available for investment, consider where your money may already be invested. You may already have a private retirement or pension plan. Where are they investing your money? Do you own a home or other real estate? This is the only way to prepare a sound financial plan and know how much is available to invest in stocks.
Step 2: Safe stock investing
We are conservative investors. We do not believe that we can beat the market. Therefore, we adhere to two important principles.
The first principle is:
That’s what safe investing is all about.
Your investment returns are not made from one day to the next but over a longer period. Think long-term. Decide on an investment timetable (once a month, quarterly, etc.) and stick with it. This is how it should also work when you want to sell your stocks. In no case should this happen all at once, but you should only sell so many shares until you have reached your desired goal.
The second principle is:
Do not put all your eggs in one basket
Build a broad-based investment portfolio. Economists have shown that 20 to 30 stocks provide the most diversification advantage. We also recommend spreading your shares across countries and industries. This way you will have broader diversification than that of a typical equity index fund, which is weighted according to the total value of the shares (market capitalization).
If one sector is disproportionate in your stock portfolio, then it is time for the "slowly out" strategy. Slowly enter into "green" areas and slowly move out again of "red" areas - because no one knows where the ups and downs will actually occur. Use the free Obermatt Google Spreadsheet as a helpful guide to see where your stocks are at a glance.
Step 3: What stocks to buy
Subscribe to the Obermatt Stock Update to receive our latest Top 10 stocks based on your selections each week. Each Obermatt Top 10 stock list shows four strategies: Value (equities measured at their intrinsic value), Growth, Safety and the Combined Investment Strategy. We recommend the Combined Investment Strategy for long-term, conservative stock investments for retirement since it places the highest value on the price of the share (Value) and the financing of the company (Safety). We buy stocks for the Obermatt stock portfolio utilizing this strategy.
If you are still undecided, after reviewing our Top 10 stock lists, you can also check our Obermatt Stock Analysis, peruse the website of the company or conduct your own research.
Once you have purchased a stock, the next question that arises is when to sell the stock. Historical price developments are not the reason or basis for the sale of the stock. That is only a reflection of where the stock is valued today. To verify this, it is worth looking at the Obermatt Combined or Value rank. They indicate whether the valuation is too high (low rank) or too low (high rank).
Stocks should be sold if you do not want them anymore, they do not have a good Obermatt rank or you need to liquidate. They should not be sold simply because the price has just fallen.
Manage your shares yourself
You can save money simply by eliminating unnecessary commissions and transaction fees. That is why it is important that you do not buy and sell too often because that will increase your fees. In order to avoid unnecessary transactions and resultant fees, establish higher purchase hurdles and lower sales hurdles. This way you can have a multi-year holding period for your shares, which is optimal for long-term growth.
Possible selling hurdles
- Combined Rank over 75
- Stock on the Obermatt Top 10 list
- Safety Rank at least 50
Possible purchase hurdles
- Combined Rank below 50
- Safety Rank below 50
- Cluster risk
Use discount brokers who charge reduced commissions and fees (comparison: Switzerland, Germany) to buy your stocks. At Obermatt, we do not benefit from your transactions and have no conflicts of interest, we only make stock recommendations. Choose your portfolio manager and still independently receive Obermatt's Stock Analysis.
A word of warning
Before you start investing, first a word of warning: If the stock market is in a frenzy and everybody is buying stocks, then our Obermatt stock recommendations will seem conservative, so you do not get caught up in a “bubble”. We may not recommend purchasing expensive stocks so you will still have money left to invest once the share prices have fallen again. As a result, the Obermatt Top 10 stocks may yield returns lower than the market itself. How well the Obermatt Top 10 stocks performed against the stock markets can be seen in the latest Top 10 Returns.