Knowing how to choose stocks is a lesson for beginning DIY investors that will follow you throughout your investing journey. Here are some quick tips.
If your sole source of income is your job, you’re missing out on a lot of extra money you could be pulling in.
Your career should only account for a portion of your yearly income. If you hope to retire comfortably at a relatively young age, you should have passive income in addition to your job income.
This passive income can come in the form of investing in the stock market.
For people who know nothing about stocks, this may be a scary prospect. But fear not, we’re here to help you learn how to choose stocks so you can start earning a passive income.
What’s Your Goal?
The first step to investing in stocks is to determine what your goal is. Do you want to take a bigger risk with a potentially huge payoff? Or do you want to invest in a relatively low-risk stock that won’t get you as much of a return?
If you’re just starting out and don’t have a lot of money to spare on investments, it might be best to start out safe. Then once you feel more confident in your knowledge of the market, you can start taking bigger investment risks.
Keep Up With Stock Market News
If you want to go from being a beginner investor to a knowledgeable one, you need to keep up with the status of the stock market.
Follow stock news outlets, keep tabs on the rise and falls of different stocks, and be on the lookout for up-and-coming businesses that have a low risk/high reward tag. If you blindly invest in a company and don’t keep up with what’s going on, you may miss out on a ton of valuable opportunities.
Choose Businesses to Invest in
Now that you’ve determined your goal and you’ve done your research, it’s time to actually choose companies to invest in.
You could blindly invest in a business, but this is a recipe for failure. Instead, use a stock screener to find companies that match what you’re looking for (size, cost of shares, predicted growth).
Once you’ve found some companies that peak your interest, do your research on each specific company. It’s one thing to read someone else say a business has potential, but it’s way more beneficial to find out for yourself.
Look into who is in charge, what they are selling, the predicted path of supply/demand for their products. Check out the Warren Buffett Indicator for help finding stocks to invest in.
If you read a stock analyst say that a certain company would be a great investment, stay critical and try to look at both sides of the argument. The more diligent you are, the better off you’ll be in your investments.
Now that you know how to choose stocks, it’s time to start making some investments. If you follow these tips, you’ll be much better off than people who blindly invest in the trendiest company.
Receiving a passive income through investments is a great way to relieve the money stress you feel every week. Check out our health blog for more ways to improve your well-being!