Successful investing is more a science than it is an epiphany. The more effort you devote to performing due diligence, the greater your chances of making a successful investment. Nevertheless, your success is not guaranteed. Always select the more conservative choice over the wild outside chance. The key to successful investing, as any professional portfolio manager will tell you, is in controlling your greed impulse and sticking to reality.
Screen stocks according to industry outlook, revenue growth, outstanding shares, insider transactions, and company news. Apply a skeptical, realistic attitude to what you learn and you will eventually find a few stocks that appear to have potential as good investments.
Emphasize major market stocks in your research. Those are stocks that are included in the major stock indexes such as the Dow Jones Industrial Average (DJIA or INDU) and the Standard & Poor's 100 or 500 Indexes (S&P100; or S&P500;). These are the blue chips that are considered the strongest or most conservative investments.
Check the trading charts of your stock selections before you buy. Learn and apply technical analysis of charts because it is important to understand your stock's price history, trading range, and position in its trading cycle. You do this so you can determine the likelihood of a near-term trading consolidation or upside breakout.
Watch the stock for a few days, paying particular attention to any company news. Consider whether you want to invest before or after the company's quarterly or annual report.
Scrutinize industry trends for your stock, looking for hints of potential labor problems, economic affects, market reaction and growth opportunities.
- Invest in stages. Dollar cost averaging is one of the tested and true methods for moving cash into a stock position. Divide the amount you intend to invest into at least four equal amounts and invest it on four pre-planned future dates -- weekly, monthly or quarterly. This will average your cost of entrance and will help protect against accidentally buying at the high of the market.
- Never ignore your portfolio. Investments require daily monitoring, so if you do not have the time to devote to research and monitoring, you should instead buy a good mutual fund.
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