Trying to successfully profit from the stock market over a long period is far from easy. No one can predict the future, but I can give myself the best shot at being able to navigate it by building good investing habits.
Here are some of the ones I try to stick to that have helped me in the past.
Waiting for the spark to buy
I’m going to illustrate my habits based on an example stock that I’m thinking about buying at the moment: Standard Chartered (LSE:STAN). The global bank serves a wide range of clients, offering a full suite of financial products.
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The first habit is patience, waiting for the right buying moment. The Standard Chartered share price is down 21% over the past year. Previously, I hadn’t seen any catalyst that made me think the trend lower was going to change. Therefore, I stayed away.
Yet following the release of the full-year results today (23 February), this has changed. An 18% jump in the pre-tax profits versus last year and a strong hike in the dividend payment indicate to me that the bank is doing well. My patience has been rewarded, with it now appearing to be the right time for me to start buying.
More habits to work on
Another habit I try and stick to is building my holdings in a company. That means I’ll invest in chunks over time until I reach the full amount I want to invest.
For example, let’s say I want to have £1,000 worth of stock in the bank. I’d consider investing £250 now, and then look to invest another £250 in a couple of months time. This way, if the share price does keep falling, I buy at a lower price. Even if the stock rallies, I won’t be too unhappy adding on the way up.
I also look to try and ensure any stock pays out some kind of dividend. Of course, for some growth stocks, this won’t be the case. Even for Standard Chartered, the dividend yield is a very average 3.53%. Yet any kind of dividend helps to boost my overall profitability. It’s cash that I can pick up easily, even if my main focus is share price appreciation.
Especially during times when the market is subdued, banking dividend income can be a very important source of profits.
Diversifying my exposure
If I do buy some shares in Standard Chartered, it serves as a further tick box for an investing habit. That habit is diversification. As a global bank, it operates in 70 countries around the world, with 1,700 branches.
At the moment, the exposure it has to China is a hinderance. This is a risk. Yet the fact that it can derive revenue from places outside of the UK is great. This would help my overall portfolio, given that other stocks I own are very sensitive to how the UK economy performs.
