When you are ready to invest, you may feel like you're in a hurry to make money. You'll do better if you slow down. In fact, you should pick a few stocks to watch before you buy. You can learn which ones respond well to economic news, company earnings reports and hikes or dips in interest rates. You can create an electronic watch list that updates prices for you constantly.
Create an online portfolio. Many free sites offer this service, including Yahoo Finance, MSN and "The Wall Street Journal." You will find the place to create your watch list under the term "portfolio." You'll typically see this word next to a list of quotes on popular stocks. Click the word, create a free account, and you are ready to add stocks to your portfolio. You'll need the stock symbols to do this. Stock watch sites feature a symbol look-up tool. You can enter a company name and get the stock symbol.
Eliminate stocks, add stocks and make notes. As you hear about stocks in the news, add them to your watch list. How you choose these stocks is up to you, but make sure you understand the company, how it makes money, and how it relates to the overall economy. For example, companies that make cardboard shipping boxes serve as a barometer for the economy. When box companies are making lots of boxes, that means companies are manufacturing and shipping more, and the economy is moving upward. On the other hand, you might come across a tire company and not have a clue how to predict whether it will do well. In that case, eliminate it. Make notes about how each stock performs. Limit yourself to the number of stocks you can pay close attention to.
Identify trends. After you watch for a while, you may start noticing trends. For example, you might see that a certain stock tends to go up when the news is full of announcements that interest rates will remain low for the foreseeable future. You may simply notice that a stock tends to move steadily upward without dramatic peaks and valleys. Your site will provide you with free charts of any stock you want. Look at the chart to see if the visual representation of the stock's price action helps you spot any trends. You can start making predictions about which stocks will rise and fall.
Make purchases based on your correct predictions. Your site will allow you to create a second portfolio for the stocks you purchase. Continue watching stocks you have not purchased, but also watch the ones you have. Identify which of your predictions turned out to be correct, and which ones were wrong. This habit of watching closely and taking your time will help you hone your skill at picking winners.)
- As you watch stocks, imagine you had real money in them. For example, pretend you have $1,000 in each stock. Keep track of your imaginary gains and losses. This will make stock movements much more relevant to you. You'll see how your decisions to buy would have made or lost money.
Kevin Johnston writes for Ameriprise Financial, the Rutgers University MBA Program and Evan Carmichael. He has written about business, marketing, finance, sales and investing for publications such as "The New York Daily News," "Business Age" and "Nation's Business." He is an instructional designer with credits for companies such as ADP, Standard and Poor's and Bank of America.