To make sure you start off on the right foot for 2015, taking the time to set some investing goals could make the new year easier and more profitable. Holding high quality stocks like Telstra Corporation Ltd (ASX: TLS), Cochlear Limited (ASX: COH) as seen below could also help your overall returns.
Here are four goals that all Foolish investors should shoot for this year.
#1- Make time to follow up on stocks
Regularly read updates and news about the companies you own stock in. One hour a week per stock should be enough. Set up email alerts for company news. Read half year and full year reports, or at least the shortened media releases to see if the stock story is getting better or worse.
#2- Don't invest money that you plan to use in the next five years
Like wine, you need to let invested money age. Compounding your returns is the secret sauce for future wealth. If you take out $100 and spend it, it will only ever be $100. Over many years, that $100 could become thousands. Commit the invested money for at least five years so you don't short-circuit potential wealth generation.
#3- Reinvest your gains
Continuing from #2, profit made from share price gains and dividend income should be ploughed back into investing. This is the seed money for future share purchases. Year after year, you buy more shares with the earnings and in the following year you get more dividends or potential share price gains. Make your money really work for you.
#4- Aim to beat the market return
Set the rate of return a stock must achieve. One goal could be beating the long-term market average return of 11%. When you consider a stock, if a combination of dividend yield and its potential earnings per share growth doesn't look like it will give you at least a 12% – 15% annual return, pass the stock by. The exception to this is buying undervalued quality stocks that could give you an average high return over a number of years.
Here are two stocks that could give achieve strong returns:
Cochlear Limited is the US market leader for cochlear implant hearing devices. Long awaited new products came out on the market in mid-2014, producing strong orders and revenue has seen a marked improvement. Analysts are forecasting high double-digit earnings growth over the next two years.
Telstra Corporation Ltd has made a series of investments and acquisitions in 2014 for its expansion into Asia. Although earnings growth may be not so strong in FY 2015, this is a longer-term investment for the telecom giant. Telstra is setting the ground work for sustained growth over this decade, so the benefits may take some time to flow through. It does pay a solid 5.0% fully franked yield, so with just a 7% annual share price gain, potentially netting you a 12% annual return.
