Stock picks - why you should care about the new iPhone

As a financial planner I generally shy away from giving advice on shares, or stocks as known in the US (that's a whole other story).

However in this fast moving modern age of information and online share dealing more and more clients are taking views on individual shares.  There are some basics which can be put into place in order to make the most of your dealings.

Buy what you know - either in the industry in which you work or from your view on the street - which stores are selling, where is the traffic headed, what's selling?  If you google  New iPhone you'll find a website with over 7 million hits which merely has rumours about the new iPhone. Interest of that magnitude in a product not yet launched could be a good indication of how Apple might fare over the coming months.  What you have to decide is whether the market has already priced this in or not.

How many to buy? To reduce your risk or to achieve as we say "unsystematic risk" you need to buy between 20 and 35 companies, this may not be possible initially but work up to 35 to reduce risk.  That said with risk comes reward and for the average person with job, family and social life managing 35 shares is not practical. There is a school of thought which says you should never hold more than 10 at any time.

What's your strategy - you need a business plan to trade. Are you going to day trade or buy and hold. What are your stop losses and stop gains.

Buy when there is blood on the streets - the famous mantra of the Rothschild family.  BP is a good example of this - their share price has fallen drastically over the past few days as a result of the Gulf of Mexico Oil spill.  This does not mean that fundamentally they are a bad company and the price may recover as quickly as it came off.

Stop loss - determine when you are going to call it quits.  At that point are you going to sell out or buy more to average down your purchase price.

Don't lose your shirt. Only invest or put at risk what you can afford to lose - your stop loss strategy will help this, but likewise have a limit to pull out profits when they arise and stick to that limit.  If you can pull out your initial stake and ride the profit then you are in good shape.

Look for dividends - there were a number of shares which even though their market price fell during the credit crisis still paid good dividends. In a world of low interest rates a dividend yielding share portfolio can be attractive.

How to access - there are so many ways to buy shares, via your bank, insurance platforms, online and via brokers. Depending on the volume you will trade cost factors play a large part of your decision in how to trade.

In closing, as I started out by saying a share portfolio is only a part of a well structured financial plan for you and your family but managed well it can be lucrative and even fun.