Stock Picking 101

“The time to obsess about macro factors has probably passed,” reports Citigroup’s chief global equity strategist Robert Buckland. “If a stock has decent prospects through the cycle, then buy it. Stop worrying about where we are in the cycle. It’s too late for that.” According to Buckland, stock picking is back in full swing. Historically, independent financial advisors say, cherry picking the best types of stocks has yielded the best returns. During particularly volatile markets, investors tend to go into survival mode and shift to the friendly giants that yield lower returns and promise a safe, steady return. Yet finance experts from Canada to Australia to the United States report that consumer confidence is beginning to shift.

Sometimes stock picking can really work out great. For instance, financial advisory professionals who advised their clients to put money into MacDonald’s fast food chain in 1992 are now enjoying 25% returns each year. Similarly, insightful investors who sunk $10,000 into Microsoft’s stocks back in 1986 would have earned 35,000% back on their investment over an 18-year period! So by 2004, that initial investment would have become a nice $3.5 million, which would be an ideal retirement cushion!

There are many different types of stock picking strategies. Some of the most common include Fundamental Analysis, Qualitative Analysis, Value Investing, Growth Investing, GARP Investing, Income Investing, CAN SLIM, Dogs of the Dow and Technical Analysis. While there is limited space to delve deeply into these complex strategies here, more information can be found at Investopedia (www.investopedia.com/university/stockpicking/stockpicking1.asp). Even when consumers learn financial investment techniques, there is no guarantee, however. According to Investopedia: “The bottom line is that there is no one way to pick stocks. Better to think of every stock strategy as nothing more than an application of a theory; a ‘best guess’ of how to invest.”

Stock picking can be done by individuals or by professionals. Top financial advisors work to assist clients in selecting a winning stock portfolio. While these individuals are undoubtedly more experienced in watching economic market fluctuations, they are still human and ultimately fallible. One should not simply entrust an enormous sum of money with a financial advisor, without looking over the periodic statements and watching the DOW/NASDAQ activity. All investing is a gamble, so expectations should be clear when getting started. Perhaps the best advice is still “don’t put all of your eggs in one basket!”

Beth Kaminski is the co-author of Curing Your Anxiety And Panic Attacks which detailed anxiety therapy as well as tips on the various anxiety disorder medications available at anxietydisordercure.com.