Your Questions About How To Pick Stocks

Steven asks…

Should I just keep my recent success to myself?

For the last two months the company I work for has only employed me for one or two days a week instead of Full-Time. I decided to start focusing on picking winning stocks. I started six weeks ago with only $2,000 and built it into $37,000. I have been asked to work Full-Time again at this point which may cut into being as successful at picking stocks. Should I mention this tremendous gain with my coworkers or say that I started investing in stocks? Would I be wise to just say I started picking stocks and not mention how much I make or should I not even say I pick stocks?

John answers:

1-there is no guarantee your lucky streak will continue
2-I hope you have put money aside for taxes for your capital gains – that would probably be at least $3500-5000 at this point
3- there is no reason to discuss personal finances with anyone

Thomas asks…

Mutual funds..ETFS?

basicly..how do u choose Mutual funds?
i know how to pick stocks but not mutual funds? based on what?

John answers:

Most “quality” mutual fund websites, such as vanguard.com, will easily let you compare mutual fund returns based on their current year, 1 year, 5 year, 10 year, and Since Inception.

This will give you a very good idea as to the funds quality. You can also visit sites like morningstar.com or lipperweb.com to get mutual find ratings.

Linda asks…

how to pick stocks?

John answers:

Value and Catalyst, then analyze compared to other stocks in sector.

Does this stock have value?
What is this stocks catalyst for success in the short and long term?

Now analyze this stock compared to others in the sector. Is it more or less expensive than others? Not for the dollar, I mean P/E ratios vs others.

Also – invest in what you know. If you follow fashion then consider investing in clothing companies i.e. JCrew, Heely’s etc etc. If you follow technology maybe you are familiar with computer companies like HP, Dell, or Apple.

Read read read! Look at the list of investing books at the URL below.

Richard asks…

how to pick stocks?

John answers:

Buy index funds that reflect the total stock market.

Don’t dabble in individual stocks.

John asks…

Where can I learn all the smallest nuances of how warren buffett picks stocks,?

and all the technicalities of analysing and filtering through balance sheets for relevant information? Actually, I have read many books on Buffett, but he hasn’t set out the exact tools and techniques that he uses for value investing, in detail. Where can I learn these tools and techniques in detail? I am willing to go anywhere to learn these techniques. Please suggest.

John answers:

VERY good question, and I have the answer you’re looking for. Back in the mid-twentieth century, there was a professor at Columbia Business school named Benjamin Graham. He was considered (and still is) the best authority on investment ever, and founded the philosophy of “Value Investing.” This is a type of investing where you find stocks that are cheap and safe relative to the company they are issued by. He taught Buffet everything he knew, which led to Buffett’s enormous success.
Graham wrote two very famous books. The first one you should read is “The Intelligent Investor”. This is meant more for laymen or people not professionally investing. Next is his textbook “Security Analysis”, which details who to analyze and pick stocks. This book is well over 700 pages, and is only necessary if you’re getting serious in the stock market.

Besides those two books and anything else Graham ever wrote or said, I’d say Buffett’s own books.

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