How to select winning stocks

    How to select winning stocks

  • 1 Invest in a company not stock

    Buy stocks in companies that have great products and great growth potential. Don't buy stock, but buy the underlying company's prospects. Investors who buy stocks because they are hot or popular without looking at the underlying business usually lose money. See global stock markets fall in 2015 

  • 2 Buy stock you won't mind keeping for 10 years

    Warren Buffet, the legendary investor, said that you should only buy stock you would be happy keeping for a long period of time. The next morning the stock market can crash and you might find yourself stuck with that company. Make sure you select stock that can perform well long term Signs the stock market is about to crash.

  • 3 Use technical analysis for timing, not for decision making

    Don't ever depend on technical analysis to select stock but instead use technical analysis to determine the right timing to buy stock you already have faith in. See The psychological factors affecting the stock market.

  • 4 Do your homework - Fundamental analysis

    You don't have to do a CFA exam but you just have to consult professionals about the company's fundamentals. Does it distribute dividends? Is the macro environment suitable? Will the company grow in the next few years? Answering such questions can help you find winning stock.

  • 5 Is the stock overvalued?

    Back before the dot com bubble, many stocks seemed attractive but most of them were overvalued. If you buy a great iPhone for 5000 dollars, it's certainly overvalued and soon you will be forced to sell it for a loss even if it's still a great phone (see The psychological factors affecting the stock market)

  • 6 Avoid Penny stocks

    Penny stocks might be very tempting. After all if the stock moved up from 0.02 to 0.04 you will double your money but if it went down to 0.01 half of your money will disappear. Clever investors aren't the ones who always win but they are the ones who rarely lose money.

  • 7 Never follow the crowd

    The fastest way to lose your money in the stock market is to do what everyone else is doing. Simply because most investors lose money. If you want to end up like them then do like them. Daring to go against everyone will help you a lot in selecting winning stock.

  • 8 Find an undervalued company

    If you know that a car is worth 10,000 USD but found someone trying to sell it for 7,000, wouldn't that be a good investment? The same goes for stock. Some stocks have great underlying companies but they sell for a price that doesn't reflect their great prospects. Buy these stocks.

  • 9 Forget about your friends and your broker

    Your friends and even your broker can give you incorrect information. Don't ever buy stock based on someone's recommendation, unless that person has done proper research.

  • 10 Approach day trading with caution

    If you must day trade, then make sure you select a stock that you can keep for some time if the market goes down. Don't buy stock of a bad company just because you think you can flip it throughout the day and make some money.

  • 11 See the future

    It was clear from its first day that Apple was going to be a great company. Had you bought Apple stock in its early days and kept them you would have increased your wealth several folds. Open your eyes for companies that have a bright future.

  • 12 Evaluate the company's managemenet

    Management can either send a company's stock up or do the opposite. When Steve jobs got back to apple the company's stock soared. Make sure you research the background of the managers running the company or at least the CEO.