In 10 years, your investment balloons to $1.2 million. On what planet is this possible? What you just pictured is the true story of the people who invested in Tesla stock in 2010. The U.S. stock market has been churning out millionaires for several decades. You too can turn your life into a success story by investing in the stock market, but it’s not fool-proof. The key to being a successful stock market investor is to invest in the right stocks.
Establish Your Investment Goals
Of course, everyone who invests in the stock market wants to make money. However, there are those who want to generate a living income, increase their wealth, or diversify their portfolio. Each of these goals will call for a different investing strategy. For instance, if you’re looking to earn an income for your current living needs, you’ll need to pick stocks that have good short-term yields. If your goal is to increase your wealth over the long term, you need stocks that have great long-term growth potential.
You can invest in the stock market with as little as a few bucks. A decent capital size gives you the best chance of making tangible gains in the stock market. As such, it’s prudent to consider the size of your investable capital when finding good stocks to invest in. If you’re starting out with limited capital (below $1,000), it’s best to focus on cheap stocks with high growth potential. This will enable you to buy more shares, which will increase your chances of making more money if the share price increases. If you have sizeable capital, you’ll feel more confident choosing expensive stocks with good upside potential.
The premise behind stock market investing is simple. Buy shares in a publicly-traded company and wait for the share price to increase. If you buy a stock at $5 per share and it increases to $10 in one year, the value of your investment will double. For this to happen, though, the demand for those shares has to keep increasing. This means more and more investors believe the company will get stronger.
There are a number of parameters investors use to measure company strength, but trends in earnings growth is the most important. The nature of the industry in which the company operates is also a crucial point to consider when you want to pick a stock. If the company doesn’t have major competitors, that’s a positive sign.
Consider Foreign Stock Markets
The U.S. stock market offers near-unlimited investment opportunities. However, a smart investor doesn’t keep all their eggs in one basket. You can also find good stocks abroad, so don’t shy away from foreign stock markets. In fact, stocks are an ideal way to invest abroad and diversify your portfolio. If you’re eyeing Israel as an investment destination, take a look here at what you should know.
How to Find Good Stocks to Invest in Made Easy
Investing in the stock market is a smart move for both rookie and seasoned investors. Your outcome will depend on whether you know how to find good stocks to invest in.