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  • Ben Melly

How to pick stocks as a beginner


I've recently partnered up with a fellow investor over Instagram, he's got a fantastic in-depth course on investing for beginners. I'll be releasing the link to all my followers via my Instagram page on the 20th of April, so keep an eye out for that. I'm very excited to bring you guys this, it's an amazing course and in an early celebration of the launch I thought I'd write an article to get you started on your investment journey.


Figure out your Goals:

The very first step is determining your investment goals and the overall purpose of your portfolio. Investors focused on simply preserving capital will have a different mindset and strategy to those who are income-orientated or looking for capital appreciation (rise in value of an asset based on a rise in market price). Income-orientated investors could possibly focus on low-growth firms in certain industries while those looking for capital preservation will generally have a low risk tolerance and often stick to trusted, blue-chip stocks. Those looking for capital appreciation will generally afford a higher risk tolerance and may look for all sorts of companies at various life cycles in hopes their value will increase. An income orientated investor generally looks for dividends, interest payments and so on. A growth investor (capital appreciation) looks to grow the original sum invested as much as possible. As the name suggests, investors looking to preserve capital simply protect the money they have, beat inflation and have a safe, diversified portfolio. Deciding which category you fall into is the first part you need to get done. There are numerous ways to pick stocks, none being necessarily the 'correct' way, but the basic strategies I'm about to speak on should help you get started on your investing journey.


Stay Engaged:

The first progression is to stay alert to the market and everything around it. This means keeping up to date with current events and opinions. Blogs, magazines and online financial news/videos should be consumed on a regular or daily basis. This will keep you in position as an informed investor. If you start seeing events and movements in the market you'll be prompted to dig deeper and find out why. The internet is a goldmine of information and you can gather all sorts of perspectives from professionals. You'll soon begin to learn the principles and basics of what makes stocks move. This type of basic analysis forms the basis for the overall 'story' behind the investment, which justifies purchasing any stock in the industry you've studied. You should also stay up to date with company press releases and investor presentation reports.


Gather a List of Companies:

There are three simple ways that are quite common and effective for finding companies you may be interested in. The first way is to find the ETF's which track the performance of the industry (preferably that you feel you may be interested in) and check their holdings. You can literally just search for these on Google and the official ETF page will disclose all their holdings or at least their top holdings. ETF's will tend to stick to domestic markets however and avoid smaller companies (small caps). You can also use a screener to gather a list of potential stocks, you can filter stocks based on sector, industry, market cap, dividend yield and much more. Sometimes the investment metrics can be mislead however. You can also just continue searching through stock analysis articles, financial news releases, blogs or videos for ideas on companies in the chosen investment space. This can be the most time consuming but often has the greatest benefits - Such as increasing your own understanding on industry fundamentals and you can often come across junior companies in your search.


Once you have chosen your industry and are familiar with the big players, look into investor presentations. They are generally easier to search through than 10-Q and 10-K reports and provide a general overview of how firms make their money and will usually contain forward-looking information on the expected direction of the company and it's industry.


Conclusion:

These are the very basic principles you must first think of when you set out to find stocks. It's all about engaging in the learning process. You have to make it a regular habit to check in with the markets, learn what makes them move and research just how to value companies. For now, get your goal clear and start investing time into your learning and initial picks.


As always, if you have any questions feel free to DM me on Instagram - @businesstutorship and be sure to look out for the full investment course. Dropping the 20th of April.

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