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- Behaviour Change Strategy
By Gabriel Adams
Choosing stocks is not a plug-and-play operation. There is time and research required. The avid investor keeps tabs on Wall Street on a daily basis, and constantly keeps a finger on the pulse of business and finance.
If you’re looking for a quick explanation of how to pick the perfect stocks and see returns immediately, you won’t find one. It does take time, and it does take research. But this is why many people also enlist the services of a stock broker who can advise them when to buy and when to sell, and in what quantity.
One good starting point for investing is looking around at the products that are popular, the ones you like to use, and the ones you believe have potential moving forward into the future. The companies that make those products are likely to do well and are worth investing in.
However, it is not guaranteed that this simple approach will work. Contrary to your instinct, not all companies that make good products are on the rise at every given moment. The last things you want to do are randomly or flippantly picking stocks that ‘might’ do well. You need to investigate, and there are systematic ways of doing so.
One way to find out more about a company’s financial history and patterns is to visit their website or contact their investor relations division. What you need to look for (or ask for) is the company’s 10Q (quarterly), DEF 14A (proxy statement), and 10K (annual) documents. These are released freely to the public and you can look them over at any time. In these documents, you will not only learn the financial status of the company, but also its plans and approach.
Once you have established the overall outlook of how a company is doing business (management strategies, future plans, etc.) you are in a better position to determine the growth potential of their stocks. At some point it does become a judgment call, but it should be an educated ‘guess’ (to use the term loosely), not a mere unqualified speculation.
On an everyday basis, you’ll need to keep tabs on your stocks and see how they are performing. Are they doing as well as you were hoping they would? If not, perhaps you made the wrong decision. That doesn’t mean sell right away, unless you believe they will be declining at an alarming rate for some reason (such as a sudden burst of bad PR in the news).
Another attribute to look for in a company before investing is whether they are strong in terms of competition. Look around at other companies who do the same thing they do, or something similar. How do they compare? If the company you’re considering investing in has a history of being overshadowed by a particular competitor, maybe it’s time to invest in the competitor instead!
Watch financial news and read publications each day to stay abreast of what is happening, not just with your stocks but with all stocks (especially those pertaining to your industry of interest). Remember the risk involved with investing, that you can lose money! So never invest more than you are willing and able to lose without damaging your personal finances or your family’s well-being. That should come as common sense, but you’d be surprised!
Invest carefully, and invest smart!
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