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Tags: finance, stocks, strategies for playing the stock market
 When it comes to generating wealth, the first thing that would typically come to mind is investing in stocks. Not necessarily a bad thing since playing the stock market can be a thrilling experience where you can win big. If you’re thinking on joining in, then you need to at least get an idea of the stock picking strategies for playing the stock market.
A word of caution before we start—though I use the term “play”, when dealing with investments in the stock market it should not be treated as a game but as a serious endeavor that can literally cost you everything you own if you’re not careful. Another thing I should warn you about—there is no such thing as an infallible strategy.
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Every strategy out there is not fool proof—there is no 100% guarantee you will become wealthy, and they shouldn’t give you that guarantee either. A reason for that is the stock market is unpredictable. There so many factors that can effect a company’s viability. At the same time there are a lot of intangibles involved—especially the human factor.
Even if it’s illogical it can still affect stock market flow. You’re better off thinking that strategies are nothing more than the best guess possible. One way to pick shares is through fundamental analysis. This is where you figure out just how much a company’s stock is really worth based on the total value of its future profits less inflation effects.
It has nothing to do with how much it is selling for currently in the exchanges. If you believe a business is worth more than its current price then you invest. But it’s not just about numbers. You should also look at their qualitative aspects as well, to wit their management and business strategies.
Find out who is running the company, their educational background, when they became management, and why they became management. Also look at how they make money—their product, its long term viability against its competitors and market demand. Basically, it’s the “who is running the company” factor that you’re using to decide whether to invest or not.
You can also do value investing by finding companies that are trading lower than what they’re worth in the stock market. Here you will be looking at a company’s earnings, dividends, book value, and cash flow in order to determine its worth compared with how much it is being sold at.
However, don’t just buy because it’s cheap—not all cheap companies have value. You really have to do some research in order to figure out a company’s real worth. Then there’s the reverse of value investing which is growth investing. Here you look at companies in the stock market whose worth is less than its current share price—basically you’re looking at a company’s long term prospects.
The most straightforward is income investing wherein you look at companies that can provide you a steady income stream. Here you look for companies that have historically given out good dividends on a regular basis and have a good dividend yield (which is dividend per share divided by share price).
Just know that high dividends don’t necessarily equate to a good company. On the other hand, the simplest stock market strategy is the “Dogs of the Dow” which was formulated back in 1972. Basically, you invest on the 10 Dow Jones shares with the highest dividend yield at the beginning of each year and adjust your holdings every year.
Even with all these strategies what it comes down to is that there is no one sure way to pick shares. When playing the stock market, you also need to consider your personal outlook, time frame, risk tolerance and the amount of time you want to devote to investing. By being a good at picking shares you can attract more wealth.
About the author
The author of this article Rick Goldfeller is a successful underground Financial Analyst who has been advising and coaching individuals for many years. Rick recently published a book on how to manage your money and attract Wealth and Financial Freedom. More info on his Finance Planning course is available HERE.
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