Expert strategies on choosing the right stock
Posted in: Investment Basics, Personal Finance
The number one question most new investors are faced with is, “How do I assess the right stock to invest in?“ There are several factors that go into making the best decision for your goals and the truth is there is no ‘one size fits all’ strategy.
Your reason for investing your hard earned dollars may hold some key insights on how you should invest.
Know your goals
Your reason for investing your hard earned dollars may hold some key insights on how you should invest. For example if you’re looking to earn a consistent income from your portfolio you may want to stick to low-growth firms. If your primary goal is to get a steady rate of return on your investment and you have a low risk tolerance, investing in what the industry calls ‘blue chip stock’, might be a right fit. Blue chip stocks are often high quality and high priced because they have a long record of steady earnings. If capital appreciation is your goal, then seek out a wide variety of companies with different market caps and lifecycle stages.
Some examples of some good blue chip stocks to invest in are NCB or PanJam. Both companies have:
- Several years under their belt
- Have a solid board of directors and management team
- Hold a good track record for performance and are market leaders
Implementing this first strategy will help you to narrow down your choices and set you up for this next expert tip.
Develop a keen eye
It’s easy enough to say, “develop your eye” but as a new investor you probably aren’t yet trained to know what you should be looking for. Now that you are armed with some basic criteria for the types of stocks you hope to invest in, it’s time to keep your fingers to the pulse. Staying informed about market events through, magazines, financial publications and websites such as ICinsider, Jamaica Stock Exchange and Investopedia, is a good way to do passive research. Learn to look for possible opportunities in unexpected places. For instance, if you come across an article that speaks about a new medical technology that has been approved to be deployed in hospitals systematically over the next 5 years, you may want to look into the company that manufactures that product to see if it is a viable stock option.
Keep it Simple
Choosing the right stock is an art, and when combined with the knowledge to analyze fundamental performance, it is an invaluable skill to possess. Quite a number of variables determine whether or not a company’s stock is worth buying. This goes beyond just profitability. For this reason beginners should keep it simple. Choose companies that have a clear and easy to understand revenue model. You can even take it a step further and focus on industries that you have intimate knowledge of their inner workings.
Ask the Experts
When in doubt turn to an expert. You don’t know what you don’t know and sometimes all it takes is an hour or two with a trusted expert to get you up to speed with the basics. When it comes down to it, the more time you spend analysing the market the better you will get at choosing the right stocks to add to your portfolio
by Ideal Group
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