QUESTION: I just want to know how to pick a stock. When do I buy and sell my stocks when I invest? What indicators do I use to choose a stock-broker and how do I choose which stock broker is beneficial to me?
Michael
FINANCIAL ADVISER: If you want to invest in the stock market, there are several matters to consider before thinking of picking stocks. You do not have to be in a hurry nor plan to lean on a stockbroker to succeed.
I suggest you first learn about the stock market: read, read, read. The Jamaica Stock Exchange (JSE) has resources which can help. It also publishes daily trading reports and news. There is much information on the Internet about investing but you must be selective. Listen, too. The electronic media also provide information on stock market activity.
Read about the companies listed on the stock exchange. They provide much information on their websites, but the website of the JSE – www.jamstockex.com – is a very convenient place to visit. It carries current and historical data on the listed companies. That includes their annual reports and most, if not all, include historical information on the financials of the companies.
Learn about the economy. In time, you may develop special interest in particular sectors of the economy. This is not bad as it will give you reason to watch particular companies in those sectors closely. As you get to know them better, you will very likely decide to invest to become part owners, which is what happens when you buy shares.
Decide the kinds of companies you prefer. Do you favour growth stocks or income stocks, for example? If you like growth stocks, you should not expect to get generous dividends because profits tend to be reinvested to facilitate expansion. Such stocks have good potential for long-term capital appreciation. Income stocks pay relatively good dividends due to the companies being mature. They are also less risky.
Determine if you want to be an investor or a trader.
Traders want to turnover their money fast. To do so, they have to be involved in the market on a very regular basis. They have to keep up with market trends and are active in the market. They must always be ready to buy and sell, be prepared to spend much time on research and recognise that each transaction has associated costs. Investors take the long view and spend less time monitoring the market.
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