My investing experience is pretty limited. In fact, I’ve never had to pick individual stocks before. I’ve only ever invested in funds via my employer’s 401(k) program.
The options in a 401(k) program are much more limited and controlled than picking stocks from the wide open market. I had enough trouble picking funds in my 401(k) program, let alone picking individual stocks. There are lots of ways to pick stocks to invest in and not all of them are right. That said, here are 3 ways to pick stocks to invest in so that you can make money in the stock market.
Pick Stocks Based on Past Performance
As much as experts say not to, most people evaluate past performance when they are choosing which stocks to invest in. The reason you shouldn’t do this is because there’s never any guarantee that stocks will ever perform as well, or as horribly, as they have in the past. Instead, you should consider where the company behind the stock is now and what the future looks like for that industry and that company.
No one has a crystal ball to predict the future, but the future is what is coming, the past is already over. You can achieve past performance in the future as nothing will ever be the same going forward as it is today.
Pick Stocks You Feel Good About
This one is a bit silly, but I’ve heard of many investors picking stock based off of things like company ethics and how much they believe in a company and an industry. Personally, I don’t believe this is the best way to make a financial decision. Buying stock is an investment and what matters at the end of the day is how the stock performs. That said, there is an argument for not supporting companies with questionable ethics, so I’ll leave that one for you to decide about.
Pick Stock with Help from Experts
Another way some people pick stocks is with help from an “expert”. An expert might be someone who has done well with the stock market in the past, or it could even be a stock picking company. Either way, it can’t hurt to have the advice from someone who has a better idea of the stock market than yourself (unless you are already an expert). In the end though, you are the one buying the stock so you don’t have to listen to 100% of the stock picking advice you get from other people.
Picking stocks isn’t rocket science, but it sometimes feels like it. You don’t want to pick the wrong stocks and end up losing your investment, but you also can’t predict the future. Right or wrong, these 3 ways to pick stocks are popular ones that are used by many people.
How do you pick stocks?