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Stock picking is a very complicated process and investors have different approaches. However , it is wise to follow general steps to minimize the risk of the investments. This article will outline these basic steps for picking high performance stocks.
Step 1. Decide on the time frame and the general strategy of the investment. This step is very important because it will dictate the type of stocks you buy.
Suppose you decide to be a long term investor, you would want to find stocks that have sustainable competitive advantages along with stable growth. The key for finding these stocks is by looking at the historical performance of each stock over the past decades and do a simple business S.W.O.T. (Strength-weakness-opportunity-threat) analysis on the company.
If you decide to be a short term investor, you would like to adhere to one of the following strategies:
a. Momentum Trading. This strategy is to look for stocks that increase in both price and volume over the recent past. Most technical analyses support this trading strategy. My advice on this strategy is to look for stocks that have demonstrated stable and smooth rises in their prices. The idea is that when the stocks are not volatile, you can simply ride the up-trend until the trend breaks.
b. Contrarian Strategy. This strategy is to look for over-reactions in the stock market. Researches show that stock market is not always efficient, which means prices do not always accurately represent the values of the stocks. When a company announces a bad news, people panic and price often drops below the stock’s fair value. To decide whether a stock over-reacted to a news, you should look at the possibility of recovery from the impact of the bad news. For example , if the stock drops 20% after the company loses a legal case that has no permanent damage to the business’s brand and product, you can be confident that the market over-reacted. My advice on this strategy is to find a list of stocks that have recent drops in prices, analyze the potential for a reversal (through candlestick analysis). If the stocks demonstrate candlestick reversal patterns, I will go through the recent news to analyze the causes of the recent price drops to determine the existence of over-sold opportunities.
Step 2. Conduct researches that give you a selection of stocks that is consistent to your investment time frame and strategy. There are numerous stock screeners on the web that can help you find stocks according to your needs.
Step 3. Once you have a list of stocks to buy, you would need to diversify them in a way that gives the greatest rewardrisk ratio. One way to do this is conduct a Markowitz analysis for your portfolio. The analysis will give you the proportions of money you should allocate to each stock. This step is crucial because diversification is one of the free-lunches in the investment world.
These three steps should get you started in your quest to consistently make money in the stock market. They will deepen your knowledge about the financial markets, and would provide a sense of confidence that helps you to make better trading decisions.
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I heard a pastor say , regarding people of the Muslim faith, "Too bad they are praying to the wrong God!" This was during a Sunday morning sermon. I flinched. Doesn't the Bible say that there is only one God? I believe it does. I found at least six scripture references:
Mal 2:10 Have we not all one father? hath not one God created us? why do we deal treacherously every man against his brother, by profaning the covenant of our fathers?
Mar 12:32 And the scribe said unto him, Well, Master, thou hast said the truth: for there is one God; and there is none other but he:
1Cr 8:6 But to us [there is but] one God, the Father , of whom [are] all things, and we in him; and one Lord Jesus Christ, by whom [are] all things, and we by him.
Eph 4:6 One God and Father of all, who [is] above all, and through all, and in you all.
1Ti 2:5 For [there is] one God , and one mediator between God and men, the man Christ Jesus;
Jam 2:19 Thou believest that there is one God; thou doest well: the devils also believe, and tremble.
I recall Osama Bin Laden asking, during one of his taped messages, "Where was your God . . .?" (during the September 11 attacks in 2001). I also recall that only about 10% of the number of people that are usually in the twin towers died that day. Did "our God" not take care of the other 90%? Did "their God" not help them in their mission? It seems to me that "one God" dealt with both factions the best He could and still keep His promises.
Does it matter that some call God "Jehovah"? Should it matter if some label their Lord by the name "Buddha", or "Mohammed", or "Jesus"? Should it matter if they refer to the Bible or to the Koran? Is not a rose by any other name still a rose? Are we not all brothers and sisters , regardless of religion, or politics, or color of our skin, or geography? I remember a scene in the movie, "Oh, God!", in which George Burns , as God, answers a question from religious leaders about Jesus, Mohammed, and Buddha. He stated, as best I recall, "They were all my sons." Of course, that was just a movie , wasn't it?
I, and my wife, Carolyn Richards, attempt to get the message across during our Christian concerts that "Prayer Works!" Prayer works for everyone, regardless of religion, or politics, or skin color , or sex, or any other physical or emotional difference. It seems to be a law of the universe as surely as the Law of Gravity is. There can be only one "god", one "force", one "cosmic consciousne. |
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