Stock investing "How-To"
How to decide which stocks to buy.
For whom is the Obermatt method suitable?
The Obermatt method is suitable for individual investors, as well as financial advisors. At Obermatt, individual investors will quickly find sound financial facts of a quality that is otherwise only available to financial professionals. Professional financial advisors and asset managers use Obermatt to track neglected stocks and save themselves time by utilizing our analysis and research.
If you already have experience investing in stocks, you can follow our express guide. There are also more detailed instructions, if you want to fully understand each step of the stock buying process.
- Open a trading account at a discount brokerage (broker comparison: Switzerland, Germany, England, USA).
- 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.
Please Note: Because of all of the information available today, stock prices cannot be wildly skewed, because then all professional investors would have been completely wrong. Nevertheless, stock prices will move more than you like and you will have gains and losses. Accept these fluctuations. You cannot do anything about it.
Do not try to beat the market, because you will have a hard time being successful. In the long term, you have just as much chance to be as successful and make the same amount of money as a professional investor. If you invest your money in stocks over the long term (20 to 30 years), you will save a considerable sum in bank fees and transaction commissions, which means that you will have significantly more in your stock account, compared to an ordinary interest account.
Step by step to self-investing
Step 1: How much to invest?
To decide how much money you want to invest into 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 is not simply made from one day to the next, but over a longer period of time. Think long-term. Decide on an investment time table (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
Look for a broad-based portfolio. Economists have shown that 20 to 30 stocks are the most beneficial for the diversification advantages. We also recommend to spread these two to three dozen shares across countries and industries. This way you will have even broader diversified than a typical equity index fund, which is weighted according to the total value of the shares (market capitalization).
If one sector is disproportionate, then it is time for the "slowly out" strategy. Also: 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 combined or value rank. It indicates 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.
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 purchase obstacles
- Combined Rank over 75
- Stock on the Obermatt Top 10 list
- Safety Rank at least 50
Possible selling obstacles
- Combined Rank below 50
- Safety Rank below 50
- Cluster risk
Use discount brokers who charge reduced commissions and fees (comparison: Switzerland, Germany, England, USA) to buy your stocks. At Obermatt, we do not benefit from your transactions and have no conflicts of interest, which is an advantage for you. We only make stock recommendations. You are free to choose the best provider for your portfolio management and still independently receive the Obermatt Stock Analysis with consistently high quality.
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 stocks expensive prices 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 newest Top 10 Returns.