If you’re interested in trading stocks, there are a ton of different stocks to choose from but finding quality stocks can be a challenge.
There are big companies, small and medium size companies, there are also what is called micro companies. Which do you choose? Where do you start? Everyone tells you that you need to look into the smaller companies because they have the most room for growth and you’ll make the most money. To me, that’s like a bug chasing a light and everyone telling you that the bug zapper is the brightest and best light and you should go after it.
When you get into dealing with smaller companies you get into what is called penny stocks. Penny stocks are the devil, no but for real they aren’t as cool as they seem. And I’ll go into a deeper dive on that later. But for now just know they are not that great, I know the theory behind them is to buy them up they are so cheap and with a $500 account you can buy thousands of shares, then if the price ticks up one place you’ll double your account. Which seems well and good. Only it’s not. there are a ton of reasons why that isn’t good and the only people having success with this are those who are either scamming others or know when someone is getting scammed and reaping the benefits before the scammer has the ability to do it themselves. I’m getting off on a tangent though, this post isn’t about penny stocks it’s about quality stocks. Put it this way, do you see Warren Buffet trading penny stocks? If you aren’t sure, go take a look at Berkshire Hathaway’s holdings and that will tell you.
A quality stock consists of a business model that is sustainable and profitable. They produce and sell products people use and love using every day. Products people will always buy, either out of necessity or out of love for the brand. Think Starbucks and Apple. It seems as if they almost go hand and hand. Go to your local Starbucks, you won’t be able to keep track of the Macbooks, iPhones, and iPads. But I doubt you’ll see the Samsung name on anything there. Point being, brand loyalty is a huge thing. And companies loyal to their customers will have customers who in turn, are loyal to them. That my friends is a company you want to get behind.
Another big thing to look for is stock price. Most likely if a stock price is lower than $5 I would question it. Or if a stock has a really high dividend percentage. Why? because there is probably a reason no one is buying that stock. You could take the time to look into it or just move onto the next.
A big reason not to trade stocks that are cheap is their unpredictability. There is enough of that in the bigger companies as it is, you don’t need any more risk thrown into the picture. You want boring predictable stocks. Yes I know, it isn’t sexy but asks yourself why are you here, why do you want to trade and invest anyway? If it’s to trade unpredictable stocks with unrealistic expectations, at least have some fun with it and head to the casino instead. If you’re going to trade consistently you’re going to have to trade boring, consistent, predictable stocks like Disney.
Yet another reason to trade big stocks, for the most part, they have a pretty decent history. A stock that has patterns you can find, models that fit the history and predictable cyclical patterns, that’s the stock you want. They don’t move fast but don’t worry that’s actually a good thing. It gives you time to think about what you’re doing and not make hasty decisions.
If this long and boring idea of trading interests you and has you to the point where you would like to learn more, head over to my free course and sign up. It’s completely free, no pressure to buy anything else. Just some great info on helping you get started.