Stock Picking 101
“As an investor, you have to be really patient,” says Howard Atkinson, president of BetaPro Management, a company specializing in Exchange Traded Funds. “And right now, it’s hard to be that patient,” he admits. He said that some years, fund managers who prefer stock picking have periods of poor performance, but other times they yield quite well. Many advisory firms chase after “what works,” which makes stock selection a tricky nut to crack, considering this strategy only works if the right stocks are chosen. Even so, a diverse portfolio can yield the best returns, so many Americans are reconsidering this more daring approach again.
Investors who are interested in stock picking have many different places to learn financial secrets, tips and trends. According to Forbes Magazine, some of these personal financial advisor “hot spots” include ClearStation (www.clearstation.etrade.com), MSN Money (www.moneycentral.com/investor), Marketocracy (www.marketocracy.com), Reuters Investor (www.reuters.com/investing), MarketHistory (www.markethistory.com), Morningstar (www.morningstar.com), Sector Updates (www.sectorupdates.com), Stock Fetcher (www.stockfetcher.com), Stock Selector (www.stockselector.com), ValuEngine (www.valuengine.com) and Wall Street Transcript (www.twst.com). Over time, the consumers who watch market activity will begin to develop a fundamental understanding of the markets.
There are many different types of stock picking strategies. Some of the most common include Fundamental Analysis, Qualitative Analysis, Value Investing, Growth Investing, GARP Investing, Income Investing, CAN SLIM, Dogs of the Dow and Technical Analysis. While there is limited space to delve deeply into these complex strategies here, more information can be found at Investopedia (www.investopedia.com/university/stockpicking/stockpicking1.asp). Even when consumers learn financial investment techniques, there is no guarantee, however. According to Investopedia: “The bottom line is that there is no one way to pick stocks. Better to think of every stock strategy as nothing more than an application of a theory; a ‘best guess’ of how to invest.”
In these troubled times, some people are wary about stock picking and reasonably so. A number of people who tried to “get in on credit card investing” wound up devastated when the financial market unexpectedly collapsed. The same holds true for millions of citizens who were told that real estate was a sure bet. Perhaps the most important lesson from this whole thing is that there is no such thing as a “sure bet.” All stock products are merely a gamble; an educated guess. Sometimes these gambles can bring in handsome dividends, while other times they yield unrecoverable losses. Even so, there is no better system to raise residual money. Bonds and bank account interest accrue at such menial rates, it’s hardly worth one’s time; yet a carefully considered portfolio aimed at long-term rewards is the best system we’ve got.
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