Making money requires work - even in the stock market. Most successful investors study a variety of sources and ask a lot of questions.
- Skill level:
- Moderately Challenging
Other People Are Reading
Things you need
- Brokerage accounts
Shop for undervalued companies.
Find stocks that have price-earnings ratios significantly lower than those of their peer group.
Watch for bad news. Wall Street often overreacts to bad news such as missed earnings, which will drive a stock lower than it should go.
Pick the jockey, not the horse. Find out who is running the company and where the executives worked previously.
Look for strong balance sheets. Companies with low debt loads, positive cash flow and consistently good earnings are good prospects.
Check out the portfolios of successful mutual-fund companies. If they are getting great returns year after year, they are holding stocks you might want to buy.
Know when to cut your losses. You want to invest for the long term, but you don't want to stick with a consistent loser.
Work hard. Do research. Read financial news. Study quarterly and annual reports as well as registration statements, looking for trends and opportunities.
Grill your broker. If the broker is recommending XYZ stock, ask for a detailed explanation, with an eye to growth prospects and historical performance.