The stock market is a massive and ever-evolving miasma of possibilities. For beginning investors – or for experienced investors for that matter – having true insight about the markets is a difficult thing. All you have to do is read Michael Lewis’ Flash Boys to get an idea about the forces which stabilize the markets, and also throw it into chaos. For the everyday investor, the fickle nature of the world markets, as well as its inscrutable complexity, are reasons that Diversification is advocated at every turn.
Diversification is important because it accounts for some of the ebbs and flows of the market, keeping the individual investor relatively secure. In an ideal situation, a single portfolio will comprise more successes than failures, and these will allow the investor more than enough success across a lengthy career. This is the basic mechanism behind long-term, conservative investment strategies, usually based upon ETFs and similar financial products.
While this is, perhaps, the best way to start a career in investing without having to do much work, other than putting money into your accounts, many people will get a lot richer by doing a little more work. This involves researching company stocks, and picking winners. Stock picking is notoriously difficult. But the people who complain about it most are usually the ones who got screwed, as the direct result of not having done their research adequately. Of course, no amount of research can prepare you for every possibility. But it’ll improve chances of winning it big, with better outcomes resulting from the more learning you acquire.
There are increasingly helpful ways to do this. Modest Money’s Stock Wizard Tool is one such example. Let’s say you want to start to understand the long term stock value trajectory of a huge international company like BB&T. A quick glance at the page will show you portals to a bunch of important information, for anyone who wants to know whether to buy, sell, or ignore BB&T stock. Let’s take the Highest Dividend Yield page, for example. With this information alone, be able to see the value of recent BB&T investments relative to common (and uncommon) alternatives. Going back to the main page, you’ll have plenty of reading to do, in order to get a more well-rounded understanding of what it might mean to be an investor in BB&T. This is just one of the many stocks contained in this tool. As a starting place for understanding the basics of individual stocks, you couldn’t do much better.
From here, it’s important to dig deeper before investing lots of money in one company. It’s important to get a sense of this business’s place in the industry they exist within, as well as outside factors like industry competition, as well as rising innovations which could unseat them from the economic stronghold they’ve commanded for many years. Again, there are no sure things in investing, but these are the sorts of considerations everyone must make if they’re hoping to make a significant investment in an individual stock.
Andrew Black is a finance and copy writer from Baltimore, MD.