How to pick good stocks?

I am investing in the stock market. I know that some stocks are good and some are bad. How to pick good stocks? Any tips?

Thank you in advance!

 

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Tips my friend?

Buy low. Sell high. )))

 

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If you know nothing, the safest thing to do is buy a diversified mutual fund, such as an S&P 500 index fund.

 

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Buying stocks is a gamble which you might have a chance of making something if you are lucky and don't have to worry much about how much the stocks move but if you do worry allot then do not invest because it will cause your heart to stop at times.

 

While I suppose that is qualitatively true, it differs from typical "gambling" in that the average rate of return is actually positive, not negative.

 

Thank you for the responses.

I prefer stocks over mutual funds because of inflation (Philippine inflation to average 3.6%) and 'stock market''s superior track record.

 

What I am planning to do is buy and hold of a portfolio of stocks over a long period of time. I mean invest in the market conservatively long term whether a boom or a bust because of the presumption that the share prices of 'good' company increases through time.
I think it's not gambling if it's based on historical data, supported by in-depth fundamental research and real-time technical analysis, and you won't leave everything to chance.

Perhaps the question should be: What are the underlying factors that affect a company's actual business and it's future prospects? I'll try to determine a security's value by focusing on said factors. I would greatly appreciate if someone can guide me.

 

Why and how? Is youreyes' tip 'Buy low. Sell high' the key? Or there are other reasons for the positive returns? If so, what are these reasons?

 

If you're a rookie long term investor then you'll want to:
1- Look at companies that have successful track records at creating exciting products that people want (tech companies are easier for this).
2- Keep up to date on what's happening in the business world at minimum on a weekly basis (read the financial times, bloomberg, etc. as they are less sensational and "paid for" by sponsors). Understand that it is very unlikely that you will hold onto a position for the entire duration of your portfolio.
3- Instead of just randomly adding to your portfolio, take your time. Add a position every couple of months, or just when you find an opportunity. No need to rush.
4- Find prices that you think make sense from a valuation perspective. It's hard to be precise, so don't try to do that unless you're a financial analyst already. If not, just look for thresholds that make companies worth buying or selling--for example, "Company X hasn't released any new product, but their stock has risen 5% lately" might be more risky of a trade than you anticipate, so avoid it.
5- Always buy when prices rise, and sell when prices fall. The notion that you can time the market to buy at it's trough and sell at its peak is certified idiocy. If you want to buy Company Y but the stock price is falling, wait until the price begins to stabilize and rise again before you buy.
6- ALWAYS SET A STOPLOSS; I'd suggest using a trailing stop at 2-3% depending on your position size and such. Always exit losing positions. Either add into winning positions, or use capital to open new positions.
7- Don't bet against the market, lol.

These are some easy steps for a rookie market investor. If you have any questions, feel free to ask me or to send me a PM, especially if you'd like to get into more interesting stuff. For ideas, look at companies that banks and/or other large investment companies are buying into. Don't listen to what people recommend on stock shows or newsletters--instead, look at their filings or news reports (bloomberg, reuters, ap, etc.).

Hope this was helpful.

 

Huh? A mutual fund is an investment in the stock market!

The US economy grows and the stock market is where the value of American companies is traded, so its value is the sum total of the value of those companies. And the major stock indices are based on the value of established companies, which grow faster than average because they are established (whereas small business fail at a high rate). So for example, the S&P 500 index has grown at an average rate of 8% per year after inflation since it was created 80 years ago. Casino bets, on the other hand, lose around 3-10% per bet.

 

Mutual funds underperform the market; brokers push them because they pay higher commis.

 

My friend is an investor for a bank. He told me to look for things I would buy, and then look at the company behind it.

What purchases have you made recently? What will become popular?

I'd say educational software is poised to skyrocket...

But there are also stocks overvalued because of their appeal.

Tread softly. Diversify (eggs basket thing).

(Another thread indicates I would also advise against oil investing, or even most green energies, in case of a LENR breakthrough.)

 

If I understand you correctly, this contradicts youreyes' tip. Somebody also said "Buy if the current price is less than buy-below-price, Sell if current price hits (or go very near) the target price, and Hold if current price is between target and buy-below-price".

Which of the two is correct?

 

sorry i don't know much about mutual fund. Thank you for the clarification/correction.

 

Sorry I wasn't able to send PM. My post count must be 20 or greater. I currently have 8 posts.

Please teach me techniques in analyzing and interpreting information. I want to learn your investment style. Can you share both your losses and successes?
Please PM me your e-mail address. Thanks a lot.

P.S. Why do many people think the stock market is risky?

 

...and than it hits a low as was in 2009...

http://stockcharts.com/freecharts/historical/spx1960.html

 

it's called sarcasm...

 

Sorry for my choice of words or the tone. I'm not a native English speaker. It's not my intent to demean or ridicule. I only want to know which is correct because I am buying stocks. Hope you understand.

 

Can you elaborate a bit why not invest in oil? Thank you.

 

You are talking about a certain type, not all mutual funds. Index funds are tied to the market and are typically no-load.

An individual investor - especially a beginner - is unlikely to reliably beat the market with individual stock picks, so the suggestion that they do it is very bad advice.