In the previous article we went over the principles of investing in stocks, and briefly touched upon an 'investment profile'. An investment profile is a place where we define our investment parameters — parameters that guide us in analyzing, buying, and selling stocks.

The profile is essentially a set of numbers that we maintain on a sheet of paper or in a file on our computer. The parameters defined in the profile drive all our investment-related actions and help us stay consistent, disciplined and data-driven.

An investment profile has three major sections: a) general parameters such as the principal amount we have available to invest in stocks, b) analysis parameters to measure the health criteria of stocks, and c) 'threshold' parameters for various alerts that we want to receive to keep track of when a stock price has risen enough, dropped, etc. Having alerts notify us instead of us having to constantly check reduces our work.

We'll describe all of these in this and subsequent articles.

Investment Profile

We start with a simple profile that defines how much money we have to invest. As we go through the different steps in the investment process, we'll add new parameters to the profile. Each time a new profile parameter is introduced, we'll describe what it means and also provide a sample value.

Investment Profile Parameters

General Parameters

• Principal: This is the total money available for us to invest, across all stocks.
• Total number of stocks: The maximum number of stocks (companies) we invest in at any given moment. We want to make sure that this is a manageable number, so that every stock gets individual attention.

Analysis Parameters

This section contains our criteria for evaluating stocks. We'll populate this in the next article where we learn about analyzing stocks.

Thresholds

This is a set of conditions that we'll track to keep us informed about how our stock investments are doing. For example, we might want to be notified when a stock price drops by X percent or when it has risen by Y percent.

Just like the analysis parameters, we'll describe these in detail in subsequent articles and populate this section when we describe the life cycle of a stock price.

Sample Investment Profile

Let's take a look at a sample starter profile:

Summary

We created an investment profile and seeded it with the first set of parameters: how much we want to invest and in, and how many stocks we want to invest in. As we continue learning about investment concepts, we'll populate our profile with appropriate parameters.