“Honestly Officer, I’m usually very well behaved.”
- the company is a good bet,
- the value of the share is likely to go up, and
- they’re likely to pay a dividend that beats bank interest.
Financial advice and an adjustment
The Strategy: Buy low, sell high.
- Buy BHP shares at a ‘low’ price (relatively speaking)
- Sell it when it reached a price $2 higher than the buy price
- Keep rolling the dividends and profits into the kitty
- BHP is the largest volume-traded share on the ASX – someone is always looking to buy or sell it.
- Its price fluctuates regularly – not necessarily in a wave pattern. But it’s generally bouncing up and down by a few bucks over the course of a month.
- If they bought too high, it was still a solid share they could hang on to until the price came back.
Results so far
What could go wrong?
- You could use money you need to survive, so you have to sell at a loss.
- The company could completely tank and you lose everything.
- You might forget to hold some of the profits aside to pay tax.
- You could buy at such a high price that it doesn’t go above that price for several months or years.
Forced to sell at a loss
Company tanks, you lose everything
- Buy shares in ‘reliable’ companies. I pick BHP because I know that industry and the company well, and I think it has good prospects. It pays reasonable dividends. It’s a company I’d be happy to have in my long-term portfolio.
- Use an alert or stop loss. You may like to have a price in mind at which you think ‘This is not going the right direction. I want to minimise my losses and get out now.’ You can do this with:
- a stop loss – a standing order to sell if the price drops to a certain point, or
- by getting an alert sent to your email or phone when it hits that price. Then you can put in a sell order manually if you want to.
You forget to set aside tax
The price doesn’t go higher
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