Wednesday, 27 January 2010

Sometimes stock picking can really work out great.

Stock Picking 101

posted in Bricks and Mortar Business |

It’s time for fund managers to “return to their natural stock-picking tendencies,” said Citigroup chief global equity strategist Robert Buckland. “Just when the bear market (and subsequent rebound) has bullied us all into being very macro is the time when a good contrarian should be moving micro.” Over the last few years, the financial advisory business has been playing it close to the vest to protect as much of their clients’ investments as possible. They’re hesitant to move away from safe options because everyone is fearful of market fluctuations these days. However, some analysts say it’s precisely this strategy that’s holding us back. Stock picking is slowly but surely coming back into favor again, offering higher yields and better deals for people who know when to get in and when to get out.

Sometimes stock picking can really work out great. For instance, financial advisory professionals who advised their clients to put money into MacDonald’s fast food chain in 1992 are now enjoying 25% returns each year. Similarly, insightful investors who sunk $10,000 into Microsoft’s stocks back in 1986 would have earned 35,000% back on their investment over an 18-year period! So by 2004, that initial investment would have become a nice $3.5 million, which would be an ideal retirement cushion!

There are many different types of stock picking strategies. Some of the most common include
  • Fundamental Analysis,
  • Qualitative Analysis,
  • Value Investing,
  • Growth Investing,
  • GARP Investing,
  • Income Investing,
  • Dogs of the Dow and
  • Technical Analysis.
While there is limited space to delve deeply into these complex strategies here, more information can be found at Investopedia ( Even when consumers learn financial investment techniques, there is no guarantee, however. According to Investopedia: “The bottom line is that there is no one way to pick stocks. Better to think of every stock strategy as nothing more than an application of a theory; a ‘best guess’ of how to invest.”

Stock picking can be done by individuals or by professionals. Top financial advisors work to assist clients in selecting a winning stock portfolio. While these individuals are undoubtedly more experienced in watching economic market fluctuations, they are still human and ultimately fallible. One should not simply entrust an enormous sum of money with a financial advisor, without looking over the periodic statements and watching the DOW/NASDAQ activity. All investing is a gamble, so expectations should be clear when getting started. Perhaps the best advice is still “don’t put all of your eggs in one basket!”

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