This simple idea will make you feel more confident about making money with stocks.
So you’ve selected a strategy that works for you, or maybe they all work for you. Now what is your next step? Do you pick the most actively trade stock of whatever day you begin trading? What is your next move? Do you see everyone in the community to invest in some things and don’t invest in the other? See, that happens a lot.
What I have heard works best, and what will give you better confidence is you should invest in companies that you know and in industries you understand. Exactly what does this mean? Well let’s say you notice a trend amongst your friends, they are all buying a certain brand. Or how about this, you noticed that as of late 2017, a lot of people began flocking to games like Fortnite and other “Battle Royale” games. How can you profit off of this in a short-term way or even long-term? You can begin to ask yourself questions like “is this a short term trend or something that is here to last?” or “is this something that I can profit off of within one year or will this take a many year dedication?”.
In the Fortnite example, I would look and ask myself “what companies are tied to their success and how is that measurable?”. I then realized that a huge part of that game is when the players use headsets for a better listening experience. Who is the most popular maker of audio headsets? Their name is Turtle Beach. Now, I knew that because many of my friends use these brands and play games like that. Gaming entertainment really took off last year for those reasons and I saw that right there was a way to capitalize. It was an opportunity.
The strategies we talked about before in my previous entries, you can use them in this way. You can invest in companies you know and follow closely while using those investing strategies. At the end of the day, you need to do what you’re understanding of. Don’t follow the crowd, but make your own path and stick to your guns. You will find more value in making choices for yourself and investing in things you understand. So if you’re interested in the retail market and follow the likes of L Brands, don’t invest in Apple unless you fully understand the way they do business or how they are capable of making money. Whatever you’re interested in, you’ll most likely be able to comprehend their product and services easier than a company you hardly know or understand. The comprehension is important, as this gives you a layer of transparency.
Although this is a small piece of advice, it is worth a ton. So main take away: invest in companies you know, as this will give you more confidence and understanding into their business. Although this isn’t the most lengthy post I’ve written, the idea that you invest in companies you know is very important, and I would caution you to venture off that path only when you have a clear understanding of new endeavors.
Now that you have those companies selected, how do we weed them out? If I know the retail sector and I have 5 companies selected from that sector, how do I know which ones are good and which ones I should stay away from? We will cover this in my next entry!
These are generalizations and meant to increase your understanding of the securities market. Any advice contained within this blog is general advice and does not consider your objectives, financial situation or needs, and you should consider whether it’s appropriate for you. The information we are giving you is for educational purposes only.
“Investing is about understanding your risk” and every time you invest in the share market there is a risk of loss. Trading is not for everyone. There is a possibility that you can lose your money. You should only act on our recommendations if you are confident that you fully understand what you are doing.