How to find the right stocks for your portfolio
If you are new to stock investing, it pays not to jump onto any stock that comes your way. Some of the first stocks you should have should be in line with what interests you. Consider the industry that interests you and take a look at the different companies that drive it and then take a look at their balance sheets.
While news, events, trends are important for finding the right stocks. They shouldn’t necessarily be your driving force. When searching for the stock, you should ask yourself what your goals are. Obviously, like most people, the ultimate goal is to make money. However, your goal may be maintaining your riches or striving to ensure that your retirement is taken care of.
So, which investor are you? Are you looking to maintain your wealth, secure your retirement, or simply make money?
Stocks to invest in depending on the kind of investor you are:
- If you are looking to maintain your wealth then you should generally steer clear of high-risk investments. Go for companies with proven stability over the years. Generally, you should consider investing in companies that regardless of the times, good or bad, have a pretty decent balance sheet.
- If you are looking to make some money then you should go for companies with decent dividends. You should go for things such as high-rated bonds or investment trusts in the real estate industry. Generally, your stock investments should be in companies that have good, regular dividend payouts.
A smart stock investor should have a diversified portfolio. This means tapping into high-rated bonds, secure companies or real estate among others.
Unfortunately finding or picking the right stocks is not as easy as most would prefer.
Tips for finding the right stocks:
- Research, research, research. This can be through keeping abreast of market news and reading up on financial news.
- Identify companies to invest in. You can do this by paying attention to how a given company performs. Pay close attention to both the technical and fundamental sides of the company.
- Pay close attention to liquidity. Ideally, the stocks you invest in should have good liquidity. This means that if you choose to sell your stock, you are not worried about limited buyers.
- Price is important when looking for stocks. Expensive doesn’t necessarily mean good and cheap doesn’t necessarily mean a bad investment. This is where research comes into play.
- Following your heart and interests is good but you should avoid letting emotions lead the way. Avoid going for stock simply because everyone around you is going for it. Do your due diligence.
- Pay close attention to both quantitative and qualitative parts of the economy. Look out for news related to the company you wish to invest in. You should also take a look at the personnel in the management positions when looking at the qualitative bits of the economy. As for quantitative factors, take a look at things such as balance sheets, earnings releases, ratios, and dividends.
- Last but not least, don’t put all your eggs in one basket. Diversify your portfolio. This helps spread the investment risk. You may lose on some stocks but you may gain on others.
The information above should help steer you in the right direction when searching for the right stocks for your portfolio.