How to Pick Stocks: A Beginner's Guide

How to Pick Stocks: A Beginner's Guide

🧠 How to Pick Stocks: A Beginner's Guide

There are two main approaches people use:

1. Fundamental Analysis (Long-term investing)

This means looking at the company’s actual business and asking:
“Is this a strong company worth owning?”

🔍 Key Things to Look At:

Category ,What to Check & Why It Matters 

Revenue & Profit

Is the company making money? Is profit growing?

Shows if the business is healthy

Earnings per Share (EPS)

Net profit divided by number of shares

Helps compare company profits

P/E Ratio

Price divided by earnings per share

Tells you if the stock is overpriced or underpriced

Debt

How much debt the company has

Too much debt can be risky

Competitive Advantage

Do they have something unique (brand, patents, etc.)?

Hard to beat businesses are safer

Management

Are the leaders trustworthy and experienced?

Good leadership drives long-term success

You can find most of this info on websites like Yahoo Finance or through your broker’s research tools.

2. Technical Analysis (Short-term trading)

This approach focuses on stock price charts and patterns rather than the business itself.

📊 What Traders Look At:

• Price trends (uptrend, downtrend)

• Support and resistance levels

• Moving averages (e.g., 50-day or 200-day)

• Volume (how much trading is happening)

• Indicators like RSI or MACD

This is more useful for short-term trades, but riskier if you don’t understand the patterns well.

🧩 Bonus Tip: Know the Type of Stock

Different types of stocks serve different goals:

Type & Description

Growth stocks

Companies growing fast, reinvesting profits (e.g., Tesla, Amazon)

Value stocks

Undervalued companies compared to their real worth

Dividend stocks

Pay regular income (e.g., Coca-Cola, Johnson & Johnson)

Blue-chip stocks

Large, stable, well-known companies

🛑 Avoid These Mistakes

• Buying just because a stock is “cheap” (low price ≠ good value)

• Following hype blindly (Reddit/FOMO moves)

• Not diversifying (don’t put all your money in one stock)
  
  

🧭 Want a Simple Starting Point?

Pick companies you understand—products you use and believe in. Then look at their long-term performance and financial health