http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments Most Reliable Criteria for Picking Investments The stock market has had an impressive rally. Those who chose the right stocks a few years ago have done very well. Anyone who bought Apple in November of 2008 for $12.88 a share has a stock that today is selling for $189 a share. Likewise, Alphabet (Google) sold for $142 a share in December of 2008 and sells for $1,120 today. On the other hand, General Electric sold for $8 a share in January of 2009 and sells for $13 today. How could you have predicted which of these investments would go up in value and which would stagnate? What are the most reliable criteria for picking investments? Most Reliable Criteria for Picking Investments: Fundamental Analysis This approach looks to the future of an investment as determined by its current status. Is a company making money and is its business plan such that it will continue to make money, and more of it, in the future? The intrinsic value of an investment is a reliable guide to investing. The intrinsic value of a stock is the expected company cash flow discounted to current dollars. It is a discounted cash flow valuation. An inherent weakness in this concept is that too often the medium and long term prospects of a company and its stock price are not clear. Warren Buffett, who uses this concept, and learned from its creator, Benjamin Graham, said something interesting in this regard. He said that he tended to avoid tech stocks because he could not accurately predict how their products would be doing five years hence in the fast moving tech world. On the other hand, he was pretty sure how a Coca Cola or Snickers bar would cost and that they would still be popular. To the extent that you can accurately predict business success a few years ahead this can be the most reliable criteria for picking investments. Most Reliable Criteria for Picking Investments: Technical Analysis Technical analysis uses price patterns to predict the future rise or fall of investments in the stock market. Followers of this approach say that all available information in the stock market is immediately priced into a stock. But, there are price patterns that are repetitive. And, if one can accurately recognize the first part of the pattern, they can profit as the rest of the pattern evolves. This approach is used in day trading but can also be effective in swing trading a short term investment. Short term investment in stocks can be extremely profitable. It can be more profitable, over the years, than long term investing. This is because the rate of return on long term stock investment is typically not linear. Market volatility, market trends, and market reversal all affect stock prices, even of the most stable of stocks.

1. B y w w w. P r o f i t a b l e I n ve s t i n g Ti p s . c o m
MOST RELIABLE CRITERIA
FOR PICKING INVESTMENTS

2. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
The stock market has had an impressive
rally.

3. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
Those who chose the right stocks a few
years ago have done very well.

4. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
Anyone who bought Apple in November of
2008 for $12.88 a share has a stock that
today is selling for $189 a share.

5. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
Likewise, Alphabet (Google) sold for $142
a share in December of 2008 and sells for
$1,120 today.

6. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
On the other hand, General Electric sold
for $8 a share in January of 2009 and
sells for $13 today.

7. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
How could you have predicted which of
these investments would go up in value
and which would stagnate?

8. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
What are the most reliable criteria for
picking investments?

9. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
Most Reliable Criteria for
Picking Investments:
Fundamental Analysis

10. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
This approach looks to the future of an
investment as determined by its current
status.

11. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
Is a company making money and is its
business plan such that it will continue to
make money, and more of it, in the future?

12. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
The intrinsic value of an investment is a
reliable guide to investing.

13. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
The intrinsic value of a stock is the
expected company cash flow discounted
to current dollars.

14. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
It is a discounted cash flow valuation. An
inherent weakness in this concept is that
too often the medium and long term
prospects of a company and its stock
price are not clear.

15. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
Warren Buffett, who uses this concept,
and learned from its creator, Benjamin
Graham, said something interesting in this
regard.

16. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
He said that he tended to avoid tech
stocks because he could not accurately
predict how their products would be doing
five years hence in the fast moving tech
world.

17. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
On the other hand, he was pretty sure
how a Coca Cola or Snickers bar would
cost and that they would still be popular.

18. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
To the extent that you can accurately
predict business success a few years
ahead this can be the most reliable
criteria for picking investments.

19. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
Most Reliable Criteria for
Picking Investments:
Technical Analysis

20. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
Technical analysis uses price patterns to
predict the future rise or fall of investments
in the stock market.

21. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
Followers of this approach say that all
available information in the stock market is
immediately priced into a stock.

22. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
But, there are price patterns that are
repetitive.

23. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
And, if one can accurately recognize the
first part of the pattern, they can profit as
the rest of the pattern evolves.

24. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
This approach is used in day trading but
can also be effective in swing trading
a short term investment.

25. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
Short term investment in stocks can be
extremely profitable.

26. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
It can be more profitable, over the years,
than long term investing.

27. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
This is because the rate of return on long
term stock investment is typically not
linear.

28. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
Market volatility, market trends, and
market reversal all affect stock prices,
even of the most stable of stocks.

29. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
This approach requires that the investor
pay closer attention to a given stock than
with long term value investing.

30. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
The point is to identify when price bumps
will occur and invest just before.

31. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
Then, the usual course of action is to sell
the stock and look for another opportunity.

32. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
This can be a very profitable way to invest
but even pros like Buffett say that they
really cannot time the market.

33. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
Most Reliable Criteria for
Picking Investments:
Throwing Darts

34. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
Years ago a group for business reporters
taped the stock pages of the Wall Street
Journal to the wall and threw darts at it.

35. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
The stocks that were “picked” using this
method were noted.

36. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
Then the reporters kept track of those
stocks, assuming that they had purchased
an equal dollar amount of each,
commissions and all.

37. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
Then, over the months and years they
tallied the results.

38. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
It turned out that their “stock picks”
outperformed the S&P 500, the vast
majority of money managers, and virtually
every mutual fund.

39. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
Later, one of the reporters wrote the
book A Random Walk Down Wall Street.

40. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
There were several lessons from the dart
throwing and stock buying exercise.

41. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
•All stocks are fairly priced given available
information
•By purchasing a large number of stocks
an investor can average out the high and
low performers
•You need 10 blue chip stocks to average
out

42. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
•And, you need 40 mini-cap stocks to
accomplish the same purpose
•Either way, an investor who followed this
approach had about a 12% per year
appreciation of their investment portfolio

43. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
This approach incorporates cost
averaging in which an investor invests an
equal amount every month, quarter, or
year.

44. http://profitableinvestingtips.com/day-trading/most-reliable-criteria-for-picking-investments
And, this system balances out companies
that go bankrupt with those that
experience spectacular growth.