Even before the creation of the Dow Jones Industrial Average in 1896, there has been a ferocious quest to buy High Return, Low Risk Stocks. More commonly stated “buy low and sell high.” With today’s economy, it’s even more relevant than ever. Fortunately, the good news is that now it’s much easier than ever because of computers, and smart phones. Here are a couple tips that may be helpful for the individual investor when selecting High Return, Low Risk Stocks:
Knowledge: The most important step in trading stocks is knowledge. “Know thyself.” This old adage is especially true when purchasing stocks. A person must know exactly who he or she is and what they intend to accomplish. Use discipline in all your decisions.
Risk Tolerance: Are you a 21-year-old maverick who’s single, has a great job, and still lives at home, or are you a 68 yr old retiree with a mortgage?
Time Frame: Day trading, short, midrange, or long term? Are you looking for a base hit, home run, or a grand slam? Are you attempting to gain 10%, 50%, 100%, or even a 1000%? Is that in one day, or over 20 years?
Capital: Do you intend to buy $100 worth of stock, or $100,000? Will that be spread out over increments of time, or all at once? Perhaps you want to buy $100 worth of a penny stock, or maybe you prefer to acquire a $100,000 stake in Goggle, or Berkshire Hathaway?
Information Sources: Internet (Goggle, etc), TV (CNBC, etc), Radio (WGN News, etc), Newspapers (Wall Street Journal, etc), Magazines (SFO, etc). Rumors (The infamous word of mouth or, I literally heard it on the street.)
Research: Conduct an abundance of research when selecting your High Return, Low Risk Stock. Answer these important questions: What are the markets actually doing? Are they rising or falling? How is the sector performing that your select stock is a part of? Is it increasing or declining? How is this company currently doing? Is the price rising or falling. How is it competing? Have you heard good or bad news? What do the numbers look like to you? After answering those questions, get a second opinion.
Finally, after you have selected a stock and gone through these basic steps, ask yourself this question: How do I feel about this particular stock now? If you’re honest with yourself and utilize intelligence and common sense, you should greatly increase your chances of selecting a High Return, Low Risk Stock.