Real New, Unfiltered Opinions

3 Ways to Pick the Perfect Stock

Posted by By Bryan at 26 July, at 20 : 47 PM Print

Playing the stock market may seem like a fun and very lucrative game, but it is far from that. Any person who has gone in blindly to the stock market will tell you that you will lose your pants fast if you do not know what you are doing.

Learning how to pick the right stocks takes some people years to learn. In fact, people go to college to learn how to properly invest in the stock market. So, that is even more reason for you to do lots of research and practice, practice, practice before you attempt to invest any real money in the market.

Below you will find the three basic steps to get started on how to pick the correct stocks.

Before you invest any money, you need to know what you plan to get out of your investment. What I mean by this is that are you looking for short-term gains or are you planning for your retirement? This is very important, so you need to know which way you want to go because it will vary greatly on the stocks you pick based on this. A long term investor looks for stocks with stable growth over a long period of time. A good example of a long term, stable stock would be Microsoft. Short term investors look for high yields in return for greater risk. Tech companies would be a good example of a short-term investment.

If you are looking to invest short-term, then you need to know the two types of trading in order to not lose everything.

The first type of trading is called momentum trading. This type of trading is where you look for any kinds of stocks that have increased drastically in the past few months. Here, you are looking to ride the wave of recent growth to new highs. This is the safest and the normal path for short- term investments, as they already have a history of growth recently. You want to ride this out as long as possible so that you can get the best return possible.

The other type is called contrarian trading. With this type, you are looking for companies that have gotten devalued heavily recently, basically where you think they are under valued. An under valued company will rise when the true value is realized, so investing this way is extremely smart. However, you have to hope that you are right and that the market realizes the mistake soon or else you will be stock with a low performing stock.

Do research on the best stocks. There are tons of tools to help you screen out the bad ones and you can also filter them based on historical numbers, like P/E, etc.