Your Questions About How To Pick Stocks

Nancy asks…

Does anyone have some good advice for trading stocks online?

I have never traded stocks online but I would like to start. What site is best for trading? How do I pick stocks? Where can I find good fundamental and technical analysis? Are there any sites out there that seem to pick consistent winners?

John answers:

I can tell that you are a value investor. You want to ask 3 questions for the price of 1… Well, here you go.

What site is best for trading?
Every one has different needs. If you’re new and don’t keep much money in your brokerage account, then Scottrade is probably good for you. They’re real time charts are pretty good, but no CD’s are available, the cash account only pays about 0.5%, and they charge pretty heavily for mutual funds. If you want to leave money sitting in a MM that pays 5% while you’re out of the market, like a choice of no load, no fee mutual funds, has an excellent site for research, want to buy competitive CDs on line, all in one place, then you might like fidelity. It’s what makes you happy. If you don’t like the sevice, then you can always change.

How do I pick stocks?
An answer would take volumes to provide, so let me suggest some literature:

I would recommend William O’Neil’s “The Successful Investor” as a good starting point. Follow that up with Peter Lynch’s “Beating the Street”. That should provide you with two strategies that you can learn from in building your own investment strategy.

Other good books include “The Motley Fool Investment Guide” by Tom and Dave Gardner or “Real Money” by James Cramer.

I have read all these books and many others and devised a strategy that adopts a bit from each one.

Another thing you can do is invest using a fictional portfolio. Let that run for a few months to see if you are ready to start trading with real money. In the meantime, invest in mutual funds. Once you are ready, sell the fund and invest on your own.

Remember, the time spend learning about investing is far less then the money lost by not being prepared.

Where can I find good fundamental and technical analysis?
You’re on your own for this. There’s a multitude of excellent sites out there, where you can get fundamental ratios. Try Zack’s, Yahoo Finance, MSN finance, and a multitude of others are out there for free. As far as technical analysis, you need to research and find what works for you. As far as charting goes, Bigcharts is a good free site. Personally, I like Telecharts, which has a fee, but well worth the 50-75cents per day for the sorting capability, fast way to cycle thru many charts, and the ability to write your own personal critera.

Are there any sites out there that seem to pick consistent winners?
No. And anybody that says they can is a liar.
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Sharon asks…

What is the best way to invest in stocks?

Everyone seems to have a method for investing in the stock market. I’ve also seen many websites selling “how to” information about investing in the stock market and how to pick stocks. The problem is, how do you tell if any of these sites or “gurus” are legit?

John answers:

I agree with some of the other folks here. Basically you need to invest in a good education. Be cautious of “how to” information. Sometimes, not always, but sometimes the “how to” info that is for sale is sold by individuals who really aren’t very good traders themselves. It goes back to the old adage: “Those who can, do. Those who can’t, teach.”.

That being said, investing in stocks isn’t a mystery. There are basically three fundamental views about investing. Technical analysis (the subjective method of investing), an academic “efficient market” method (the intrinsic method of investing), and the objective method of investing.

You need to respect the markets. If you aren’t prepared to put in the time it takes to do a really good job of studying the company’s cash flows to try to determine if the stock is over or undervalued, the risk of the particular sector you want to invest in, the management, and the underlying philosophy that the management applies to the company, you are going to have a hard time being successful.

Study the greats. Peter Lynch, Warren Buffet, etc. There is a reason they are successful, and it doesn’t have to do with throwing darts at a dart board.

You might want to get a basic primer on financial markets by going to investopedia, then read some more in depth information about the three different types of investing at
http://www.twintierfinancial.com/articles/stockpicking.html

Then head on over to amazon.com and pick up “One Up on Wall Street” by Peter Lynch and also the book “Total Investing”

Linda asks…

how to i pick stocks that will go up in value?

John answers:

I try to pick stocks that are industry leaders that for some reason are having problems at the time. When everyone one is dumping but the stock has only a slight setback that is when to buy. I also look to see if the company is buying back it’s own stock. This indicates that they have looked at the market and have decided there are no companies they wish to purchase or do not or can not expand their products or services. Also if the coampany pays a consistant dividend it usually means it is fairly stable. With dividends being taxed at a lower rate now (15%), the dividend can mean a stable company. Again I try to find companies that are in a down cycle but are stable. Others will choose companies that are up and coming in an industry. The major problems with them is they are usually cash poor and if there is a major downturn in the market or their industry, they may not have the cash reserves to weather the storm…

Betty asks…

Should I mention to anyone that I pick stocks?

I don’t have a lot of interests in life but I try to pick winning stocks myself with no help. At work one day I if my boss asked me what I did after work and I said review stocks. I notice he might make a comment here or there about the stock market since I told him. I don’t talk about how much money I am investing or which ones. On Friday my boss said to me the stock market has been up the last few days and if I am making any money. I told him I am making money but that August was a bad month. Should I have mentioned to my boss my interest in stocks or should I have never said anything about it?

John answers:

As long as you aren’t trading during your work hours, your boss is simply interested in your hobbies as a way to get to know you better.

Jenny asks…

how to pick stocks???????

like how do you know what ones to pick, and how do you know that they willl go up for that day? with out doing to much research?
or is it just pretty much luck?

John answers:

Well, there’s more to it than luck.

If you really don’t want to do the heavy lifting, get someone else to do the research for you.

This website will analyze stocks for you and send you a report.
Http://www.traderbots.com

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