Investing in stocks may seem like the most basic investment for investors who are just starting their trading career, but in reality it actually requires more experience for an individual to understand. If you are a newbie in the financial market then beginning with an individual stock is not the way to start your investment portfolio because buying individual stocks, is much riskier than mutual funds that tracks a large group of stocks.
Individual stocks have greater risks, but also offers greater potential for returns plus if you build your portfolio by picking stocks yourself, you’ll get even bigger returns compared to an investor who hires a fund manager.
If you think you’re ready to further diversify your investment portfolio on individual stock, here are some things you need to know
How can you Decide Which Stocks to Buy
- Positive Price Momentum - investors should be keen in looking for companies that have a more positive pricing history or companies that are developing. In order to find the right stock, ask around and look for stories in the press that are compelling and or related to the company’s success in the past few years and analyze how it is moving in the market.
- Buy what you know and what you’re interested in – Invest in an industry or a company that you are familiar with, if you invest your money in a company that you are interested in there is a bigger chance that you won’t get tired of researching about it.
- Invest in stocks that are straight forward – pick a stock company that is fairly easy to understand especially if this is your first investment in an individual market. Invest in stocks that offer an easy-to-understand, and with a straightforward company business model. This tip is one of the trademark advice of Warren Buffet, one of the most successful traders in the market.