Does the Stock Market scare you? Most of the population don’t know how to invest let alone the many different complexities of the financial world. Going from knowing nothing to owning a portfolio seems like a massive leap but isn’t as complex when we look at the process of investing. The biggest problem I've noticed is people think that the stock market can be answered with a simple yes or no. That a stock should be either bought or sold based on its own merits. While this isn't technically wrong it is not the best way to approach investing. There are around 2,400 stocks on the NYSE, and no one has the capacity or knowledge to analyze each individual company. When you look at the total stocks, ETFs, funds, and other investment vehicles in the world you now have tens of thousands of assets to analyze. To combat this, we must start thinking in terms of either/or instead of yes/no. Start wide and narrow your search. Exchanges are extremely organized with stocks segmented into sector, industry, and even sub-industry. Use this to your advantage and pick an industry you want to invest in. Filter even further by size, market cap, or just companies you like. At this point you should have narrowed down to 10 or so companies that are all very similar and can now compare them. I'll have a much more in-depth post regarding security analysis but for now look through their financial statements and compare their revenues, net income, etc. Comparative analysis is much more intuitive than looking at a standalone stock, the numbers need context to be useful. I will get much more out of analyzing T-Mobile and Verizon together than either of them alone. top-down approach is the best method to not only pick better stocks but also become confident in your decision. The first steps to building a high return and diversified portfolio is security selection and using this method is the roadmap that all experienced investors use. Do yourself a favor and organize your selection process. We can be overloaded with so many different numbers and percentages that most people quit before giving themselves a chance. Everyone should invest and the learning curve isn’t as bad as you might think. Just as I stated in my article you shouldn’t look at the entire market but segment your thoughts into smaller portions and take it 1 investment at a time.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.