Do you want to earn extra income with your idle funds? Do you want to learn about investment and financial management? When it comes to investment and financial management, many people will think of stocks, but what do you need to know to get started with stock investment? This article will take you to understand the basic knowledge of stock investment and how to read stocks. You must understand this if you are new to the stock market.
Investing Style vs. Stock Picking Strategy: Why Stock Picking Is the Key Between Long-Term and Short-Term Investing
Investment style
Investment style refers to the philosophy, operation and risk awareness of individuals or institutions when building investment portfolios or selecting stocks. Investments are divided into three types according to scale: large, medium and small; and according to style, they are divided into value, balanced and growth. Investors can choose investment targets according to their preferences and the risks they can bear.
Stock picking strategy
Individuals choose different stock picking strategies based on their own risk assessment and time and energy. If you want to make a short-term profit, you can choose short-term investment; if you don’t want to watch the stock market every day and want to make a long-term profit, you can choose long-term investment.
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Long-term investment stock selection strategy: 5 important investment indicators and evaluation methods
Choosing good investment targets The most important thing for long-term investment is to “find the right investment targets”. When investing in stocks, you need to look at the fundamentals and find companies with growth, profitability, and good prospects. Recommended reading: Stock market knowledge for beginners | How to easily understand a company from 11 indicators in financial statements
For general investors, buying at low prices is preferred for long-term investment. But in reality, the probability of buying at the lowest point is relatively small, because no one can accurately predict the price at the lowest point, or the timing of the stock price reaching the lowest point. Therefore, many investors will choose to divide the stock purchase budget into several batches to reduce the cost of holding shares; of course, there are also investors who choose to put all the investment funds in the trading account at once, waiting for the opportunity to come, and then they can immediately buy the target they are watching.
In the stock selection strategy of establishing core and satellite holdings for long-term investment, stocks can be divided into core and satellite holdings. If there is a 1 million investment portfolio, 800,000 can be regarded as core holdings, which will not be used easily, and the remaining 200,000 are satellite holdings, which can be used flexibly for short-term investment.
Don’t follow the crowd and buy high and sell low. Long-term investment does not require daily review of the market, but regular review is still necessary. Most people will review their investment gains and losses on a monthly basis, rather than a daily basis, in order to avoid being affected by the public sentiment and affecting their previously set investment plans.
Long-term investment can be as short as three years or as long as more than ten years. For such a long-term investment, a stop-profit point should be set to ensure that the profit is pocketed. The method of setting the stop-profit point can use the simple “10% rule”, that is, set the expected value of annual return to 10%. If the investment plan is to invest for three years, the stop-profit point is 30%, and if the investment plan is to invest for 10 years, it is 100%. When the investment reaches the stop-profit point, the investor can buy back in batches to seize the profit opportunity of subsequent increases.
Short-term investment stock selection strategy: How to seize short-term market opportunities?
Day trading
Day trading refers to the act of offsetting the same-day purchase or sale transactions of the same amount to reduce investment risk or control transaction costs. Day trading is usually most widely used in the securities market, because the prices of securities such as stocks fluctuate greatly, and day trading can reduce investment risks. For example, if an investor buys a stock on the same day and then feels that the stock has risen too high and wants to sell the stock, but does not want to take too much risk, then he can use day trading to buy again with the same amount, thereby offsetting the original sale transaction and achieving risk control of the investment portfolio.
Option Investment
Option Investment is a derivative financial product, and its value will change with time and stock price fluctuations, so it can be used as a short-term investment tool. The price of options fluctuates greatly, and the trading volume is also large. For investors who want to pursue high returns in a short period of time, they can use the price fluctuations of options to achieve short-term gains. In addition, options have an insurance function that can reduce risks. For example, buying call options can make profits when stock prices rise, and buying put options can make profits when stock prices fall. Therefore, options can also be used as a risk management tool for short-term investments. However, option investment is a complex issue that requires investors to carefully consider their investment goals and risk tolerance, and conduct corresponding research and preparation.
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Margin Trading
Short selling is to borrow stocks and sell them, and then buy them back when the stock price drops to return the borrowed stocks, so the trading cycle of this type of transaction is usually relatively short-term. Short-term short selling transactions are usually completed within a few days or weeks, while long-term holding of short selling is less common because long-term holding of short selling may increase risks and costs. It should be noted that short selling is riskier and investors need to carefully assess the risks and operate with caution.
Mixed investment stock selection strategy: How to balance long-term and short-term investments?
Long-term investment requires reviewing the profitability at regular intervals and making appropriate “rebalancing”. “Rebalancing” refers to the balance between the industries to which the stocks belong, and reallocating investment funds to other industries. While making long-term investments, you can also make short-term investments. In addition to fundamentals, short-term investments rely heavily on news and technical analysis, and require time and energy to closely monitor market fluctuations. Therefore, when self-learners who are new to buying stocks are doing mixed investment stock selection strategies, they can allocate their long-term and short-term investments according to their own time and energy.
How to develop your own stock picking strategy: from analyzing your investment style to building an investment portfolio
Investing in good companies The main purpose of investing is to make a profit. Therefore, when selecting investment targets, you should choose companies that have pricing power and accumulate more and more profits over the long term to make a profit.
Understand why you hold shares and choose to invest in companies that are good companies. Review your holdings every three months. If your ideas change, you can also make corresponding changes to your holdings.
Understand that investment always involves risks. Due to the volatile investment market, investors’ emotions and mental states are also easily affected, thus affecting investment decisions. Therefore, investors need to cultivate a stable psychological quality, be mentally prepared for investment losses, and master the correct psychological coping strategies. For example, when stocks continue to rise, investors are prone to greed, which increases risks, or have short-sighted investment thinking and miss good opportunities to sell. On the contrary, when stock prices fall, investors are often prone to panic and anxiety, and miss the good opportunity to buy, or sell too early, reducing profits. Therefore, investors need to take positive psychological measures, such as regularly reviewing their investment goals, avoiding the interference of greed and fear, maintaining calm and objective investment thinking, and learning to deal with risks and failures, and cultivating strong psychological qualities. These psychological measures can not only help investors cope with market fluctuations, but also improve the success rate of investment, making investors more stable and confident in the market. The above explains the pros and cons of long-term investment and short-term investment. I hope it can help novice stock buyers find their own stock selection strategy, create passive income through investment, and realize their dreams as soon as possible!
