how do i successfully research stocks for myself?

Question

I wish to start testing the stock market waters because I know being a young investor can be beneficial.

At this point, I'm only slightly familiar with 'volume', the three types of stocks (penny, growth, blue chip), and the two general methods of making money (dividends and stock prices rising).

But everything else -- especially detailed researching is extremely foreign to me. I'm tempted to just take internet advice, but I know that is not the most secure way to decide where to place my money.

Yet besides reading opinion articles, I don't know which pieces of information about the company to search for, and furthermore, I have no idea about how to put these pieces of information together to form a comprehensive opinion about a stock.

Any tips about researching stocks -- especially how company history etc-- plays into the mix are welcome.

Thank you all in advance!

Answer 1

I hate to bring you the bad news but, it is very hard to SUCCESSFULLY research stocks by yourself. Unless you have a degree in finance; like I do. The best thing you can do is to invest your money in a DIVERSIFIED PORTFOLIO. Don't try to buy one stock because you've heard some news of it and it seemed interesting, or if the stock was recently upgraded by big name investment banking firms like Goldman Sachs, Morgan Stanley, or Bear Sterns.

The fact of the matter is that it is VERY RISKY to do that. You can lose a lot of money that way. It's too risky and not worth it. Imagine how you would feel if you invested $5000 in a stock and then it drops down to $2500 in a week.

Best thing to do is to build a portfolio of stocks (using several industries) which are diversified and carry a very low risk. There should be at least 14 stocks in your portfolio. Ideally, there should be 30, but not many people can have enough money to buy 30 different stocks.

However, if you really want to learn how to research stocks, then I suggest studying applied equity valuation methods such as the EP or the DCF models.

Answer 2

There are a lot of books that will tell you about investing. You might start at your library or go out to Amazon and check out what they have. If you open an account with Fidelity, they have a lot of research material on companies. A great deal more than TD Ameritrade for example.

There is the option of investing in mutual funds. That way you do not need to do so much research. You just have to determine which mutual funds are good and the universe is much smaller. You can buy mutual funds directly from the fund company or many through a stock broker such as Fidelity or TD Ameritrade. Some you can even buy like stocks.

But first things first. Get a couple of books and begin reading on investing in stocks. There is even a "Investing for Dummies" book and it is highly thought of.

Answer 3

Since you are young you don't need a get rich quick thing, so look for the Blue Chip stocks- big companies that have been around a long time and will be around when you're old. Dividends are a good thing. There are stock funds that invest in a wide range of companies which minimize your chance of losing money. Then you don't have to watch your stocks everyday- just sit back knowing that, barring a depression, history is on your side.

Answer 4

First gather some general idea as to what is happening in the markets, the macro economic situation and all other related business info, for all that you must read a good business paper.

Next would be learn more abt what kind of companies and sectors you want to invest in. You can do that by reading the Co's financial annual reports, its filings with the SEC, etc , then understand the trend of the share, its price, volume and related info.

More imp keep your eyes and ears open, remember in the stock markets, Information is wealth.

Answer 5

Read, Read, Read. and listen to others. Yahoo finance actually has alot of great articles. Most articles will have to links to companies, from there you can check out their financials which start out greek, but make sense after awhile. You can set up practice portfolios on yahoo and tract stock performance to see if you have what it takes, and it is better than learing the hard way.

In every industry there are winners, so find something you like, and focus on that area. You will probably know more about that industry, and have a better Idea of where the next moves will be.

Answer 6

Learn technical analysis. Then you'll be able to identify the general trends in prices, you need to be able to understand the charts before you start investing. News is just a marketing tool. The price does not lie.

Check out this ugly guy's blog to get an idea of what i'm talking about. http://blog.fallondpicks.com/

Answer 7

There are stock investment clubs which are very good in your local community who study stocks. Also the NAIC has a great magazine and non profit organization that teaches people how to invest. Good luck.

Answer 8

I personally use Sharebuilder. Quite a lot of information on that site.

Good luck!

Answer 9

"Ugly" Eh???

;)

Thanks for the reference link - I also have a site which features stocks with listed stop, target prices and annotated charts.

http://fallondpicks.com/Members/Breakout.htm

Best wishes,
DJF

Answer 10

new york times