The stock world is complex but thrilling. With over 55,000 companies in various industries to invest in, many get overwhelmed and don’t know where to start.
Investors will see the potential to earn extra income by betting on the right companies. Navigating the stock market will be full of ups and downs, but with tips on how to research the right stocks, invest for the long haul, diversify your profile and know when to sell, you will be a pro in no time.
How to research winning stocks
Do you consistently hear about how great the stock market is but worry about getting sucked down a rabbit hole when researching? You’ve come to the right place for strategies to discover the perfect stocks. Let’s start by identifying what the stock market is. It “refers to several exchanges in which shares of publicly held companies are bought and sold. Such financial activities are conducted through formal exchanges and via over-the-counter (OTC) marketplaces that operate under a defined set of regulations,” according to Investopedia.
Now that you have a foundation, it’s time to implement strategic research methods. Write down a couple of companies that you are interested in. Next, you will take a deep dive into each of these companies by looking into the following:
- How they generate revenue.
- Their financial reports.
- What sets them apart from other companies in the industry.
- Any financial trends.
Monitor the companies frequently until you feel you have a good grasp on what their financial situation will be for at least the next couple of years before you decide to invest.
Stay for the long haul
Many stocks and bonds will fluctuate often due to the fact that they have transactions that are being updated every second. If investing in the stock market is a new adventure for you, it can become intimidating, and you might even feel like you need to sell when the stock is on a downward slope.
However, investing in a stock for a long period of time can be promising as it can become compounded. Capital Group says compounding happens “when your investments produce earnings, those earnings get reinvested and can earn even more.” In other words, staying for the long haul can be extremely beneficial.
Diversify your profile
The stock market is full of risks. To reduce your chances of a loss, it is essential to diversify your profile. Maintaining a variety of stocks across different companies, industries and geographical regions can lower your risk since one factor may experience a dip in revenue. In addition to dividing up your stocks, it’s always a good idea to have investments in other areas such as bonds or real estate.
Know when to sell
As much as it is encouraged to prolong the amount of time you invest in stocks, it is just as important to know when it is time to sell. For example, you might consider selling in the following circumstances:
- You have found a more promising stock.
- The projected financial status of the company has changed.
- You want to take advantage of tax-loss harvesting.
- You are rebalancing your portfolio.
The decision to sell a stock can be difficult, but ultimately, there are times when it is inevitable. The pros and cons should be weighed before making a final decision.
Are you ready to take a step into the exciting world of stocks? Start slowly by taking the first step to research and monitor multiple companies. Remember not to jump ship too quickly unless conditions show there will be an outcome in your favor. Finally, protect your overall investments by spreading out your stocks among many companies, industries and geographic regions.
Lindsey Certonio is a project manager at Fullcast, a Silicon Slopes-based end-to-end RevOps platform that allows companies to design, manage and track the performance of their revenue-generating teams.