How to Pick Winners in the Stock Market

There is no magic key to picking winners in the stock market. Even the most brilliant investors miss the mark sometimes. The fact is, no one is right all the time, not even the most astute and popular investors. You can, however, increase your percentage of wins with careful analysis and a watchful eye on the market.

Step 1

Look for companies that export their products overseas. According to economist Fred Fraenkel in Forbes, American investors and advisors focus too heavily on American issues to their peril. The world economy affects the price of stocks more than ever, and those companies that play on the global field might have the chance to be more productive.

Step 2

Review the annual reports of companies before you buy stock in them to see if they have the kind of business model you support. While you can’t be expected to know all the details of every investment you make, you can rely on your common sense to see when a company is being smart -- and that makes you a smart investor. As Warren Buffet says, a simple business model is usually the best.

Step 3

Purchase stocks from large companies when the stock is being sold at a bargain. For the most part big, blue-chip corporations are not going to go under and once they hit bottom -- and all their dirty laundry is made public -- they don’t have anywhere to go but up. If you start to buy shares in these companies at their low point, and continue buying as the price starts to move back up, you minimize your risk.

Step 4

Follow the lead of one of the most successful stock traders, Warren Buffet, and plan to keep your stocks for several years before even considering selling them. When you think of yourself as investing in the company, you will give it time to grow and mature. You’ll increase the odds of picking winners when you choose an investment that leaves you with the feeling that you are a part-owner. However, if there comes a point in time when you no longer like a stock you already own, sell it. Don't keep a stock in your portfolio just for the sake of being a long-term investor. Move on to something else.

Tip

  • Choose a stock broker or financial advisor whom you trust and stick with her. Just like you need to play stocks for the long-term to develop a consistently winning portfolio, you need to give your advisor the same latitude for helping you choose winning investments. If you listen to too many different advisors and look at too many different stock Web sites, you’ll only question your decisions more and end up with no effective strategy at all. Of course, if the trust is gone, move on.

Warning

  • Don’t be afraid to take a chance when you hear about an emerging technology or when you believe in a company that is preparing to go public. While smart investors maintain a diversified portfolio, winning investors are the ones willing to take a chance now and then. Of course, use money that you can afford to lose when taking such a risk.

Photo Credits

  • Jupiterimages/BananaStock/Getty Images

About the Author

Linda Ray is an award-winning journalist with more than 20 years reporting experience. She's covered business for newspapers and magazines, including the "Greenville News," "Success Magazine" and "American City Business Journals." Ray holds a journalism degree and teaches writing, career development and an FDIC course called "Money Smart."

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