Introduction
My parents aren't the kind that give
allowance, but they will buy me a birthday present. What
do you recommend?
Getting Stock Investment Ideas (or Picking Stocks)
In a nutshell, pick companies that make good products and provide good
services. They will make good profits. Most importantly, consider companies whose products
you can understand. Try not to consider more than 10 at a time.
"Lots of kids at my school wear Nikes. Maybe I
should consider a share..."
When I go into McDonalds, there are always long lines. McDonalds
must be making a lot of money. Should
I go for a piece of McDonalds?
Bob's Oddities Store is always in a mess, and nobody's there--not
even Bob! Should I buy this stock?
My uncle works at Hughes, and he says that they recently made a
hot deal. Should I follow up on that deal?
Refining (or Screening) Your Choices, Doing
Research
In this stage of the selection process, try to reduce your list to 5
companies or fewer by doing research. For instance, if a good investor were trying to
decide over whether to buy Nike or Reebok stock, he would probably pick the Nike stock
because of its good growth record and bright outlook.
One of the factors that will be important in your screening will be price performance. To
see whether your prospective stock choices do better than the market does, you'll have to
get some information regarding these numbers. The performance of the stock market is your
ruler; use it to measure the performance of your stock.
External Factors: The profitability of a company is affected by (a)
government policy, (b) economy, and (c) competition.
Internal Factors: The growth of a company is dependent on its past track
record, its products, and its services.
 
|