How to choose a stock*

By: Sara Fickerova 🤑

*Disclaimer: These are some tips and tricks, not sure fire investment advice.

We recommend checking out our new investor blog if you’re completely new to investing, welcome!

 

Company’s general information 🗒

Long term stability, success against competition, what they do

1. Long term strength and stability

  • Has the company shown that they can withstand even the toughest of times? 
  • Have they been around for a while but still seem to be doing well?

 

A “yes” to both of these is exactly what you’re looking for!

2. How do they fare against competition?

  • Do they have an edge?
  • Do they have special/different/leaders?
  • Are they bringing anything new to the table? Are they different, or doing something differently? 

There are so many companies doing the same thing, but it’s important to recognise that some do it better than others.

3. What does the company do?

  • Consider choosing a company you know and understand. It can help boost your confidence!
  • What is their key product, or service? What do they do? How do they make money? What influences the sector they’re in?

 

Summary general information

You don’t need to know it all, but always be sure about the fundamentals, so that you can make an informed decision. It’s likely that a company with long-term strength and stability and a competitive edge will turn out to be a great pick. Be sure to know what they do, how they do it, and how this might play out in the future!

However, now you know the fundamentals, you might also need to establish what your goal is!

3 potential investment goals 🥅

Side income, growth, and wealth preservation.

If you’re looking for side income, then choose stocks that pay dividends.

Dividend = a portion of a company’s profit that is paid directly to people who own a share of their stock

Dividend yield = yearly dividend amount / stock price

Potential factors to consider when choosing dividend stocks:

  • Dividend payments should increase over time to account for inflation, or at least remain stable
  • Some companies may pay one-off dividends, meaning that you may not be receiving money over the long-term. In this case, consider checking out the company’s dividend history to see whether the dividends are regular.
  • A solid dividend yield is 2-6%. Usually, a higher yield is better. However, a lower stock price can also cause a higher yield which can be deceivingly good since decreasing stock price isn’t usually a good thing.

 

Examples: Apple (0.58% yield), Johnson & Johnson (2.73%), Devon Energy (6.80%)

If you’re looking to actively grow your portfolio, look for companies that show potential, or have been growing steadily

  1. Beware that these companies may be less stable, compared to established companies like Ford Motors or Coca-Cola.
  2. Keep in mind that their earnings and other financial metrics should be steadily rising over time!
  3. When choosing a growth stock, look at what makes the company different. What’s the story? What’s their edge? Are they truly revolutionary? Do they bring anything new, with potential?

 

Examples: Tesla, Shopify, Block

If you just want to keep your money somewhere and leave it to grow carefree, then blue-chip stocks or ETFs might just be what you’re looking for.

  1. Blue chip stocks are huge companies with amazing reputations. You know it’s a blue chip if the company pays dividends, has been around for a while, has done well in good and bad times, and is also considered a leader in its industry.
  2. ETFs are also a great option, learn more here!

Examples: Apple, S&P 500, Ford

Summary takeaways 🗯

Consider a company’s long term strength/stability, success against competitors, and what they actually do in accordance with your investment goals.

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