Picking Winning Stocks

Ask a hundred different investors what stocks are in their portfolio, and chances are, you’ll get a hundred different answers. 

 Some might have struck gold by holding growth stocks or trading stocks in an industry they understand very well. Others might swear by their high dividend stocks with consistent returns. 

 Investing in the stock market can be highly rewarding, but you need to carefully consider your options and do thorough research to find the stocks that suit your financial goals, risk tolerance, and investment strategy.

If you’re just starting out, (and a little like me) you might be overwhelmed by the number of choices you have. So, here’s some quick and easy ways to help you filter through the noise and (hopefully) pick a winning stock.

1. Identify Your Goals: Are you seeking long-term growth, stable income, or a combination of both? How aggressive can you be and what is your risk tolerance.

2. Choose Shares That Support Your Goals: Not all stocks are made equal.  Your goals will influence the type of stocks you should consider.

• Growth Stocks: These are companies whose earnings grow faster than the average business in their industry or the market. For example, in 2024, Nvidia has a 3 year CAGR (Compounded Annual Growth Rate) of 86.91%. 
• Income Stocks: These are typically well-established companies with steady growth and have a history of paying dividends regularly. For example, Maybank has a relatively high dividend yield of 6.08% and issues dividends twice a year — March and September.  

• Value Stocks: These stocks are often undervalued / overlooked by the market because of competition or a negative perception that doesn’t do their market price justice. For investors seeking bargains, getting in early on these stocks could be lucrative.

Once you have penned down your goals, assessed your risk tolerance and filtered out a lot of stocks, now comes arguably the most important part of the process.

3. Research: There are a lot of things you should look at or just follow licensed research analysts (aka the investor’s assistant) or reputable sites like Motley Fool for the latest trading ideas.

To effectively evaluate a company for investment, start by analyzing its financial health, industry trends, and management team. Shortlist companies with competitive advantages like strong brands or proprietary tech.

Once you have selected a few stocks, remember that diversification is essential for a balanced portfolio - Don’t put all your eggs in one basket.

This simply means not overly relying on any one investment, sector or stock because if it performs poorly, you’ll lose a significant amount of money from one decision. By spreading your investments, you can lower the risk of a significant loss. That’s why ETFs like Vanguard S&P 500 ETF (NYSE: VOO) are attractive options.

The market will always change its trends and cycles but ultimately, shaping your portfolio is your decision. Regardless of what you choose, the important thing is to stay informed, stay invested and stay “locked in”.