Whether you have millions to invest or a couple hundred dollars dedicating a
certain amount of money to buying stocks is easy choosing the right stock to buy
is the difficult part if this sounds like you then don't worry we've all
struggled to make wise investment decisions at one point or another and
luckily I'm here to guide you in the right direction in this video I will
share with you how to pick a profitable stock and get rich and if you're new to
the channel then hit the subscribe button below for more life-changing
content so first off what is a profitable stock for the purpose of this
video a profitable stock is any stock that is undervalued that you can acquire
and then sell at a later date in order to realize a profit now while this
sounds easy enough and it can be when using my advice there is some work to be
done to be able to identify these stocks and this potentially lucrative decision
requires you to understand some core fundamentals with respect to the
companies you are investing in firstly you will need to assess the price
knowing the price of shares in their history as you evaluate a company stock
will indicate whether or not you may be able to acquire a profitable stock
second there's revenue growth when a company's revenues increase typically so
well at share price buying stocks and companies that are consistent with their
revenue growth is generally a safe bet thirdly there are dividends search for
companies that pay high dividends to the shareholders and invest in those only
thriving companies can pay high dividends next is market capitalisation
companies with the large market caps are usually large and diversified enough to
be negatively affected by a small change in market factors think about companies
like coca-cola or ExxonMobil they are large diversified companies who have
given their investors good returns for decades next our historical prices when
on the hunt for a stock it isn't enough to only look at the current value of the
shares also take a look at the company's share history you can date back five ten
or fifteen years just so you know how the company has been performing over
long periods of time companies who have good historical share prices are your
best bet however keep in mind that the past doesn't
to find what will happen in the future yet it still remains an excellent
indicator of what you can expect finally there's the industry before you buy
stocks you need to take a look at the industry in which the company competes
if it's a failing or fading industry then be advised to back off on the other
hand if it's an industry that is on the rise then you can feel safe to invest in
its stocks now that you know what pieces of information you need to pick a
profitable stock you must employ sound investing principles to ensure you
actually achieve the financial results you want so here are five you must
absolutely follow number one don't buy stocks based on emotions according to
Warren Buffett one of the richest men in the world success and investing doesn't
correlate with IQ what you need is the temperament to control the urges that
get other people into trouble and investing here Buffett is referring to
investors who make bad investment decisions based on emotions one of the
most common ways investors negatively affect their portfolio returns is by
engaging in trading over activity and that over activity is triggered by our
emotions number two pick the companies not just the stocks sometimes one can
forget that behind every stock you see is an actual business you need to keep
in mind that by buying a share of a company's stock you automatically become
a part owner of that business when you're searching for the right stock you
have to consider several investment factors but your buying decisions will
be better made if you see yourself as one who wants to buy into the business
and not just the stock with this mentality you will ask yourself relevant
questions regarding the business these questions include how does this company
operate what is its place in the industry as a whole who are its
competitors what are its long-term prospects and does it bring something
new to the portfolio business as you already own with such questions asked
you will most likely make the right decision when buying into a company
stock number three make plans for uncertain times every now and then
investors are tempted to sell off their existing stocks buy more or buy other
stocks however making decisions under duress may lead to the ultimate
investment which is buying high and selling low a
great tip here is to create a personal investment journal write down what makes
every stock in your portfolio worthy of holding on to all so with the clear head
write down the reasons why holding on to the stock in question could be a bad
idea ask yourself why am i buying lists out all the things you like about the
company as well as the potential opportunities you see in years to come
you need to have a set of clear realistic expectations what are the
metrics that count and what are the milestones you will use to determine the
company's progress when you have a well detailed journal you will be able to
detect the game-changers as well as the potential setbacks on the flip side you
also need to ask yourself what would make me sell sometimes there are very
good reasons to sell your stocks in as part of your journal write down exactly
what those doctors could be I'm not just talking about stock price movement
especially in a short term I'm talking about critical changes to the business
that may hinder its ability to grow in the long term here are a few examples of
why you may consider selling your stocks the company loses its biggest client the
new CEO starts taking the business in a different direction a major competitor
emerges or your investment thesis doesn't pan out over a set period of
time number four build up positions gradually
the course of time and not a specific time in particular is what is key to
reaping profits from stocks the most successful investors purchase stocks
because they expect to make profits over the years or even decades these
long-term profits come by means of share price appreciation and dividends this
naturally means you can take your time in buying if you want to reduce your
exposure to price volatility you can use the following strategies with the first
being dollar cost averaging dollar cost averaging means investing a set amount
of money at regular intervals weekly or monthly this set amount purchases more
shares when stock prices go down and fewer shares when there is a rise in
stock price overall it evens out the average price you pay in fact there are
a good number of online brokerage firms that allow investors to set up an
automated invest schedule next you can buy in thirds
similar to dollar cost averaging buying in thirds will help you dodge the
heartbreaking experiences of bad trading results here's how to buy in thirds
divide the amount you want to invest by 3 then pick three separate times to buy
shares this could be monthly quarterly or based on the company's performance or
events for instance you may purchase shares before a certain product is
released then invest the next third of your money into buying more shares that
the product is doing well in the market in the same vein you can divert your
money elsewhere if the product flops finally there is buying the basket if
you can't figure out which company in a particular industry will do the best in
the long term then go ahead and buy stocks in each of them yes
buy them all buying the basket will automatically mean you'll be under no
pressure to pick the best one this also means you won't miss out on profits if
one of the companies do well in the market you can use the profit made from
the thriving company to offset any losses from the failing companies this
technique will also help you identify which company is the best performing in
that particular industry with this knowledge you can increase your
investment in that company if you wish number 5 avoid trading over activity
last but not least on my list of stock buying tips is to avoid trading over
activity checking on your stocks every now and then is expected but that can
lead one to overreact to short-term events such short term events include a
change in share price due to factors like war a pandemic or a recession many
investors will make the mistake of focusing on these short-term events
instead of the actual value of the company itself this can prop the
investor to take uncalculated actions even when none is required if you notice
that your stock experiences a sharp price movement be sure to first check
what triggered the change before you make any trading decisions it may be
that the sudden change in share price is a result of mark a response to an
unrelated event it could also be that something significant has changed in the
business model of the company whatever it may be be sure it is something that
affects the long-term prospects of your business before you trade ask yourself
realistically our short-term factors like overloaded newspaper
or temporary price fluctuations relevant to how a well selected company will
perform in the long run how investors react to all the drama surrounding stock
pricing matters a lot remember the investment Journal I spoke
of earlier you can refer to that in times like these it will help you make
guided decisions during the times of unavoidable price fluctuations now you
know what aspects of a stock you need to understand before you invest and how to
be strategic in your investment dealings but I think it's also worth going over
just how profitable stock investing can truly be imagine if over five years
you've been vesting ten dollars every week and you have an average return of
eight percent by today that particular investment will be worth thousands of
dollars here's a real-life example on the 13th
of March 1986 Microsoft which was a new company at the time had its initial
public offering at that time you could buy a decent car for about ten thousand
dollars but what if you didn't what if you about $10,000 worth of Microsoft
shares instead well let me tell you according to CNBC calculations if you
had bought ten thousand dollars worth of Microsoft chairs in 1986 today in 2020
it will be worth sixteen million dollars you'd be rich as far as finances go
there is nothing that can secure your financial future success better than a
solid long-term investment let's go back to 1986 the time Microsoft went public
let's say you decided to split your $10,000 and buy ten different companies
with $1,000 each one of those companies being Microsoft the other nine companies
pack up enter out of business this will mean you've lost 90 percent of your
investment right wrong Microsoft still stands in your $1,000 investment in 1986
would be worth 1.6 million dollars today which is a whole lot more than your
initial investment of $10,000 keep in mind that I haven't even added all the
cash dividends who would have been receiving since 1986 see the power of a
good investment over time whether it's the skyscraper you acquired in New York
30 years ago or shares from coca-cola you purchased around the same time a
portfolio filled with solid long-term investments can withstand several
failures over decades will still give you satisfactory returns all thanks to
Khan found interest the problem with many
investors is that they are afraid of holding out for the long term many about
Microsoft's initial shares didn't hold on for three decades they bailed out
after their investment had doubled and missed out on enormous future gains a
small short-term fluctuation and share price and many investors would start to
panic such panic is unnecessary as it affects the investors ability to make
wise decisions avoiding wipeout risks is very important as long as you can
survive the occasional recessions depressions and liquidity crunches and
the company which you've invested in a remains valuable both in the short and
long term then your investment is safe thanks for watching if you want to go
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