By Dheeraj Veludandi. Edited by Arjun Chandrasekar.
Overview
Behind an incredible stock portfolio lies hours and days worth of research and homework. If you’re willing to put in the work, the profits are incredibly worth it in the long run. Time plays a huge role while building the perfect stock portfolio, considering the fact that investors today have greater and easier access to stock market information than decades ago.
The Long Term
The stocks you believe in will be the ones that will potentially do you the most good in the future. Even if the prices drop once in a while, if it’s a stock that you know is solid to stand and will benefit you as an investor in the long term, you should definitely include these in your portfolio. Here are some tips in choosing a stock to invest in:
- The company has products or services that appeal to its target market.
- The product or service must be unique so the profit margins are high
There might be a bunch of stocks that are trending that you may hear on the news or read online but if they don’t fit under the given tips you might have to face negative consequences in the long run, despite what the media says.
Stock Sectors
The S&P Dow Jones classified 10 main stock sectors which are: energy, materials, industrials, consumer discretionary, consumer staples, health care, financials, information technology, telecommunication services, and utilities. Many financial advisors say that it’s best to include 2-3 stocks from each sector in your stock portfolio. This way, you can have an adequate amount invested under the major categories and you can diversify your portfolio. Investors sometimes use stock rankings in order to find the best stocks in each sector or stocks for their desired portfolios.
Analyzing Stocks
You have to be careful and use research to cancel out any stocks that aren’t a good choice to invest in due to competition overload, negative status in the past that caused huge losses, being similar to other companies, etc. For example, the lack of differentiation and competition is a reason that airline companies lose money. Understanding the history and news behind a company will help you make the right choices and will guide you to building your perfect stock portfolio. Creating a time frame for your investments is also vital so you know how long you should at least keep your investments or identify the best time to sell.
Conclusion
Building your portfolio may seem like a difficult task but with great research and keeping up with your due diligence, you’ll get the job done. Nowadays, with such easy access to information at your fingertips, you have every which way to achieve your financial goals!
