Strategies for Selecting and Monitoring Stocks

When you have enough money to invest, one of the top choices is subscribing to Morningstar Fund Investor, which provides comprehensive data on the 500 best mutual funds. However, the real question is, 'What do you plan to do with the stock once you buy it?'

The decision on how to proceed depends on your investment objectives. Broadly, stock picking can be categorized into two approaches: trading on short-term price fluctuations and investing in the long-term economic value created by the company.

1. Trading Based on Short-Term Price Fluctuations

If you are looking to benefit from short-term price movements, you will need information related to price history and expected trends. Most trading websites, including Google Finance, offer this data. Additionally, staying updated with news is essential, and there are several tools to help you with that, which your brokerage firm can often provide for free.

2. Investing Based on Long-Term Economic Value

For those focused on long-term growth, gathering information about the company's operations, market conditions, and future prospects is key. This data can be found in the company's annual financial reports or through services like Capital IQ. Reading industry blogs and news can also help answer qualitative questions about the management's quality and brand strength—again, your brokerage firm might offer some of this for free.

Conclusion

These two approaches represent distinctly different strategies. Understanding which one suits your needs is crucial before diving deeper into the specifics. Once you have identified your approach, you can tailor your strategies accordingly.

To give you a personal perspective, while I don't trade in stocks, I do engage in Forex trading. My personal strategy involves a 80/20 split between technical analysis and fundamental analysis. This approach can also be adapted for stock trading to benefit from both short-term and long-term trends effectively.

Happy investing!