Stock Selection

So, you now have money in a few different ETF’s but you're ready to try your luck at stock picking. Over the past few years a lot of people have done extremely well. This is because we have been in a bull market.

A bull market is simply where the market keeps going up due to optimistic consumer sentiment and there is optimistic sentiment about the future. A bear market is the opposite. It is important to know that you will never be 100% positive which you are in until it is over.

You've figured out your automatic investments and have re-allocated money to allow for stock picking, so let's go over what each ticker means.

Open: This is what the stock started trading at when the markets opened for the day at 9:30AM EST.

Close: This is what the stock finished at when the markets closed at 4:30PM EST.

P/E: Price to Earning ratio. There are two ways I like to look at this. Let's say a stock is trading at $100 and it has a P/E of 20. This would tell me that if I invest $100, it would take about 20 years for my money to double. The other way to think of it is that my stock is trading at 20 times it earning value. For example, that $100 stock makes it 20 times more expensive than what it is actually worth.

Microsoft is a great company but, if it's trading 200 times over its value is it a good investment?

Yield%: The amount of dividend paid out to you over the year. Some stocks pay monthly, quarterly or even twice a year. In simple a stock trading at $100 with a 10% dividend yield will pay you out $10 by year ends. Check out our article explaining just dividends here.

Market Cap: It's important to analyze a stock by its market cap rather than stock price. The market cap tells you the overall value of the company. It is calculated by amount of shares X share price. It is possible for 3 stock to trade at the same market cap but have different individual stock values. For example, AMZN, MSFT, APPL.

So how does one know which stocks to pick? Leverage the knowledge you have about the companies you know. Using the above info will help you make a more informed decision.

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