There is no shortage of stocks to choose from and while variety is good there is also a drawback. How do you know that the stock you pick is going to be a winner and not a stinker? While there is no proven formula for picking a winning stock and no one can guarantee with 100 percent accuracy if a stock is going to be a winner, there are several pointers that you should be aware of when deciding what stocks to watch. The pointers below may seem like general guidelines. Yet, so many beginners overlook these points and blindly go with stocks that end up failing. Pay close attention to the points below.
* Minimize risk
Some stocks are extremely volatile and if you’re buying stocks in industries such as the oil industry that sees fluctuations often, you might not get much sleep because you’re constantly worrying about your stocks. Know your risk appetite and watch stocks that suit your investing approach. Do not try to maximize your gains in a short time by investing in risky stocks. This approach is best for those who can afford to lose the money. Most people do not fall into this category.
Simplicity is the ultimate sophistication. Watch and buy stocks in companies that you understand. If you’re new, just start with one stock and watch how it performs. Don’t buy 10 stocks and scratch your head wondering what in the world you’re doing. Many new investors buy many different stocks without a clue about the companies or their performance. That’s like giving your money to strangers and expecting them to look after it for you. When you study any one stock for a while, you’ll notice a pattern in the way it behaves. You’ll understand what causes the price of the stock to rise and what makes it drop. You’ll also notice that throughout different times of the day, the stock behaves differently. Once you truly understand your stock, move on to the next one and so on.
* Fit in with your plan
Before you even start investing in stocks, you need to have a plan. It would be good to create an investing plan with the guidance of someone experienced in stock trading. You’ll then realize that some stocks are more suitable for your plan while others are a no-go. So, only watch stocks that are suitable for you. Do not deviate from the plan just because some stocks seem more lucrative.
* Company’s financial health
When picking a stock, choose a company that’s well-established. The stock prices may be higher but you’re paying for quality. Do not put your faith in penny stocks and expect miracles. Look at how well a company is doing before you invest in its stocks. This is why you need to do your research and read its annual reports. Look at how much growth it has, how much debt it has, if it pays dividends which are a sign of a company that’s doing well… and also look at the bottom-line. Just by observing these 4 pointers, you will be much more knowledgeable about the stock and you can decide if it’s worth keeping your eye on.
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