I think that sometimes we over complicate investing in stocks. I am no expert but I have dabbled in stock investing for some time. I think my favorite thing to do is just pick stocks that I think are cool companies that I want to succeed.
But that is not really a repeatable strategy. If you want to really win at picking stocks then here is the secret…
Buy Low and Sell High!
Hehe, so obvious right? Well let’s take a look at what that means exactly.
When are stocks low? Why might they be low? First of all how do we even know what stocks are low?
Finding low priced stocks
Here is the easiest way to get started finding low price stocks. Remember we are not talking about a low overall price but a lower then its normal price. In other words the stock price is going down.
Step 1. Click here to visit the Modest Money Stock Directory
Step 2. Click the drop down menu to select “biggest losses for”
Step 3. Click the item labeled “1 week”
You should now see a list of stocks that are “losing” or going down in price. Some will be 50-60% below the price it was last week. These are big losses.
So first of all, don’t go buy all these stocks. Some of them will keep on losing and maybe you will lose all your money. You should buy the one’s that will go back up in price.
This is the tricky part that involves some expertise but more importantly some intuition and luck. Yes, I do believe that luck is a big part of the investment game. Some people might be able to make their own luck, but I haven’t been able to to that yet.
Which Stocks Will Go Back Up?
Research, research, research. I hate reading blog posts that give instructions on how to do something and then say things like “but be sure to do your research.” I always find myself wondering how to do the research.
Here’s how you research. First off use the google. Google the stock and make sure there is no big bad news about it, like it is going bankrupt or there is a huge lawsuit against it that it will likely lose.
Next you want to check a little deeper and go through stock news sites. I recommend using the information already available on modestmoney. Just click on the stock that you want to find from the biggest losses list you already generated.
I recommend checking the Expert Analysis and the Recent Tweets. There are many strategies out there on how to analyse a stock but my basic rule is that the biggest unknowns in why stock prices change are due to investor’s feelings.
Try and get a feel for why the stock price dropped. Check out similar news from other stocks that have declined and rebounded. Make a judgement call and go for it.
Concrete Advice
I realize this is not concrete advice, but it is investing. If it were as simple as finding one ratio or one key indicator that can tell you exactly how a stock will react then it wouldn’t be investing.
So go to the stock directory here and find some losers. Buy low and sell high, make money, be happy.
