What are the ideas that you use to screen out the losers and pluck the winners?
Or do you just utilize strategies such as options trading to make money on the
ups and the downs of both the winners and losers?
Well, let's just keep it simple for today. Let's assume we want to pick winners, stocks that aren't going to
lose your hard earned money and have more than a safe bet on earning you some ca-ching.
P/E---Price to Earnings Ratio .Warren Buffet is said to prefer under valued common stocks with a price to earnings ratio under 20. I suppose it depends on how you play.
Market Cap: Is it harder to topple the biggest companies? Does it make sense to screen out the firms that are less than 1 billion in market cap? Or do you prefer to bet on smaller companies that can dodge and weave a little faster than the big wigs? Perhaps it can be compared to whom you prefer to do your banking with. Do you prefer the 5 biggest national banks? Or do you prefer a smaller local credit union, that has an affiliation with your neighborhood? Betting on the bigger players has an appearance of greater safety, but is by no means a guarantee of a fail proof investment terrain....
Does the Stock have Options available. Simply, does the stock have a derivatives market within it? Can you buy/sell puts/calls based on the ups and downs of the stock price? For some, using options is a key component of their income producing strategy. For some investors, they refuse to buy/sell stocks that don't carry an options market with it. They use options as insurance against falling stock prices, as well as cash flow management strategy.
Dividend. Canadian investment author/inspirational speaker Derek Foster has made more than a pretty penny by advocating a modest investment strategy that focuses on the buy and hold strategy of
owning solely dividend yielding high quality stocks. His advice combined with a very frugal lifestyle permits those who are disciplined investors, to potentially live off their dividend stream once their portfolio has reached a certain saturation point. Huge stock market players such as Warren Buffet doesn't pay out a dividend on his Birkshire Hathaway shares, preferring to use the profits to reinvest back into the development/growth of the company. Even though he doesn't pay dividends...Warren's Birkshire Hathaway stocks never fail to find investors willing to part with their moolah, because he has a proven track record of increasing the innate value of the shares when held over the long term. By the way, if you want to boost your financial education with some good old fashioned stock market basics, just get all of Warren Buffet's books available at any public library or community college. There are more than a few investors who cut their teeth just by following Warren's strategies.
Which Stock Exchange are you going to invest in? Within Canada, the US or overseas?
Conservative investors may tend to prefer to invest within their own country, unless of course they don't trust their own national business climate. Countries with a less than stable political environment may provide a higher than normal level of risk, but also higher potential returns.
Which criteria you use to select your investments will have a huge impact on your returns.
I like to always bet on the D word....that is discipline. Nothing works without it....not even a winning stock.
Respect your assets, and the time it takes to acquire them. Losing them can be done in a millisecond.
Take the common warning..."buyer beware" multiply that by one million and that's how cautious you need to be in investing. Well, on that note...have a brilliant and peacefully productive day.