Picking a stock carefully, for beginners

The stock market is not a place to be taken lightly. Anyone can tell you this. This is why all newbies definitely need some tricks and pointers to get them going. They also need to learn about all sorts of minuscule factors. For example, knowledge of P/E ratios, the types of contracts, etc. You also need to know about portfolio diversification, etc. In this article, though, we shall mainly focus on picking stocks.

Choosing a stock

This is the core feature of stock market trading you have to know. Now, you shouldn’t always invest in the biggest, most profitable companies. It is often harder to make a considerable profit this way. Smaller companies have more room to grow and their stock prices rise faster. However, reading every balance sheet is an impossibility. It also does not represent everything about a company. You should also be careful not to find simply trendy stocks or fund managers. It’s best to find a slow and steady strategy. This has a greater chance of profits at the end of the day. However, maybe you also do want quick easy profits (this is not generally advisable, though).

Therefore, what you should first do is find out what you want. Set a purpose for your portfolio. Do you simply want to preserve your capital, keep up with inflation? Or, maybe you want to have an income primarily from trading. These are both quite different, and require different plans of action. For an income, you want to look at strategies for low growth industries. To keep up with inflation, try to look into blue-chip corporations. Finally, there is capital appreciation. If you want to look into this strategy, having a focus on companies of ranging market caps and life cycle stages.

There is the beginning of our guide to choosing the right stock for you. Tune in for more next time.