Issue 2 of Stock Selection Criteria
Alright! So let’s dive right in!
The first thing we need to do before selecting a stock is to determine our circle of competence. There are so many companies and stocks out there in so many industries - electronics, software, pharmaceuticals, consumer goods, financials, utilities etc…
All these companies make money in different ways and there are different factors that affect their performance. When starting out, it will be quite challenging and even confusing to analyse different companies across all these industries (usually referred to as “sectors”). Instead, focusing on a few sectors that you are familiar with and are interested and excited about can make things simpler and more fun! And that’s key - to have fun! We don’t want investing to be a boring and dreadful chore do we?:)
To identify what sectors you would be most familiar with and most excited about, ask yourself the following questions -
What are your hobbies? Do you enjoy going to the gym? Do you like fashion? Do you like eating out at restaurants? According to your hobbies and areas of interest, you can consider looking into the stocks of companies in those areas. For example, if you are into sports, you will be able to better judge whether a sports company such as Nike makes good products. Moreover, you will enjoy the process of looking into the company, how it works and figuring out whether it is a stock worth buying.
Which industry do you work in? You probably know more about your company and industry than other companies and industries. Hence, looking into the industry your company is in as well as their customers and suppliers can give you ideas regarding stocks that you can potentially buy. For instance, let’s say you work at a hospital. The hospital or the company that owns the hospital may be a stock you could potentially buy. Moreover, you can look into what companies they buy all the medical equipment and devices from. The companies that make those devices could also be stocks that you can potentially buy.
What products do you buy frequently? Is there a product that you buy frequently or a product you bought and you absolutely loved? Chances are that those products are made by a company that is listed on the stock exchange. Examples would include McDonalds, Coca Cola, Apple, Microsoft etc..
So today’s homework is to identify a few areas of competence that you would like to focus on when it comes to selecting stocks. I invite you to post these in the Facebook Group where you can hang out with other investors and who knows, you might just find someone looking into the same sectors as you!
Have a great day and see you tomorrow - we’ll answer the burning question of where we can find stocks.
Legally Required Disclaimer: All information provided is solely for education and is not a recommendation or advise to invest. The course provider will not be liable for any losses, financial or otherwise incurred. This course will contain examples of several stocks in order to enhance the learning experience. No recommendation or advise to invest in these stocks is intended. Every step has been taken to ensure accuracy of the information but not assurances of the accuracy are made and the author will not be responsible for any inaccuracies. Investors may wish to seek professional guidance before investing.