Deciding what to invest in is a struggle all teens and beginning investors have. I mean there are over 2,000 stocks on Bumper and deciding to invest in just a few is difficult. So, how do you pick stocks?
Well first, we have to determine our investing goals and purpose for investing. To make it easier, below we have listed four buckets of objectives to choose from. So, why did you start investing?
- Capital Growth = seeking stocks that will appreciate in value,
- Capital Preservation = looking for stocks with little to no risk in order to preserve capital (frequently used by older people like our grandparents)
- Source of Income = utilizing stock gains or bond payments to provide an income
- Speculation Trading = high risk, high reward trading that involves speculating that a stock’s price will rise in the near future (short-term)
Most teens have the goal of capital growth. It is important to understand yours, so you can properly measure your success and determine what type of stocks to invest in. For capital growth, a teen investor might be more focused on buying blue-chip stocks, while a speculative trader would be more interested in penny stocks.
Now that you have a better understanding of where your purpose of investing lies, we can move on to what industry to invest in. This one is easy. It’s a simple question for yourself. What industry do you enjoy reading and hearing about?
Finding an industry you are interested in or already know can help you determine the market leaders and companies that are top performers in the industry. These performers may already propose great investments, however, to assure they live up to the hype, we can do some analysis. If you are unsure of the industry, check out its latest news to find some of the hottest companies in the market.
Over the last few bites, we have covered several ways to analyze a stock but now you can use that information and apply it to pick one winner. It's not easy. Investing is not a get-rich-quick scheme. It takes time, but that effort can pay off!
Your investments are not always guaranteed to be successful, which will make it important to diversify your portfolio. Having multiple stocks in a variety of your favorite industries will help you reduce risk!
Alright, let’s review.
- Uncover your purpose and goals for investing.
- Find an industry you love!
- Analyze top performers to reveal a winner.
This is easy to read about, but now it's time for you to give it a try. When you get back, we will be checking out our first investing strategy, dollar-cost averaging!
Disclosure: This article is solely for informational purposes only. Bumper does not recommend any specific investments or investment strategies. Investments in securities involve the risk of losses and past performance does not guarantee future results. Before investing you should carefully consider your investment objectives, time horizon, and overall risk tolerance as well as the information stated in the product offering prospectuses.
All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification does not assure a profit, or protect against loss. There is always the potential of losing money when you invest in securities, or other financial products. Investors should consider their investment objectives and risks carefully before investing.
Disclosure: Alpaca does not make recommendations with regard to fractional share trading, whether to use fractional shares at all, or whether to invest in any specific security. A security's eligibility on the list of fractional shares available for trading is not an endorsement of any of the securities, nor is it intended to convey that such stocks have low risk. Fractional share transactions are executed either on principal or riskless principal basis, and can only be bought or sold with market orders during market orders.