How to Pick Stocks?
The journey of most stock investors begins by first opening a trading and demat account
online with a credible broking company. But from thereon out, the success of each investor
depends on the crucial, significant decisions they make in the market.
One of the most important principles you must follow as a stock investor is dedicating
enough time and effort to learn from the market, and perfect your strategies. The other
important principle is to acquire the skill of choosing which stocks to invest in. To help you
along, here are a few important pointers on how to pick stocks :
Before Getting Started
The first step towards acquiring the skill of picking good stocks is to first do the necessary
homework and figure out your investment priorities. Here is how you can get started:
Set Your Financial Goals:
The opportunities that a stock market provides are open
to all investors. However, it is the thoughtful investor that knows precisely how he
plans to utilise those opportunities to meet his specific goals. Before reaching the
stage of stock selection, you must first determine what short-term and long-term
goals you are hoping to finance with your stock market earnings.
Is it for the purpose of saving for your retirement? Is it going to help you raise
capital to launch a business? Defining goals such as these will help you narrow down
your strategy even before you open a demat account India.
Risk Appetite and Capital:
Apart from opening a trading and demat account online,
there are two essential factors you must consider before investing in stocks. These
are - figuring out how much capital you can comfortably spend and how much risk
you are willing to take.
Both of these factors must be determined before you proceed to the stage of picking
stocks. This is because what qualifies as the ‘right stock’ for you will depend greatly
on whether that stock fulfills the capital and risk criteria you set for yourself.
This is one of the most universal recommendations meted out to
stock investors in the industry, new and seasoned alike. The advice is to avoid
focusing your resources on a single stock or a few stocks and instead spreading
them in different stocks across various sectors.
By diversifying your stock selection, you ensure that your capital is spread across a
variety of equities. Not only does this help you increase your odds of success, but
also helps you manage and mitigate your risks.
Tips for Choosing The Right Stocks
After figuring out your stock investment priorities, you can rest assured that there will be a
significant clarity in your stock selection process. When you eventually start selecting
companies to invest in, here are a few tips on how to pick stocks that align with your
There are various strategies you can implement to find the
companies with the rights stocks for you. For instance, you can track exchange-
traded funds, or ETFs, that closely follow the composition and performance of
prominent indices. Alternatively, you can start by filtering out stocks on the basis of
your preference of industry and sector.
Monitor Financial News:
Another recommendation on how to pick stocks is to
closely follow the latest financial and market-related news. Financial, well-
researched opinions in the form of interviews, blogs and articles can be informative
and help you narrow down your choices. This form of news can sometimes also be
speculative, so make sure to conduct your own research as confirmation.
Follow Public Interests and Events:
Sometimes, certain trends in culture and
lifestyle can lead to a renewed interest in specific products or services. This can
eventually lead to an increase in demand and therefore considerable price
movements for certain stocks. You can capitalise on such opportunities by following
such trends as they emerge and make investments in the appropriate stocks.
Ultimately, as an investor, it is best to exercise patience and caution before picking out the
stocks in your portfolio. Make sure to figure out your investment priorities, conduct the
necessary research and follow the guidelines mentioned above to maximise your chances of
favourable market outcomes.
Apart from these, it is recommended that you open a trading and demat account online
with a credible financial institution such as IIFL. The all-in-one account includes the
benefits of both trading and demat account India while ensuring that your trading is both
seamless and efficient.