How I Pick My Stocks: Investing For Beginners

Hi guys, it's Mark. So, I've got a secret and it's about time we talked about it. This is my crystal ball and it allows me to predict everything the stock market's going to do in the future. Look, if anyone tells you that, never believe them. They're probably just trying to sell you one of those courses for $997.

So, even though there's no magic ball that can tell you when to buy a stock before it rockets in value and makes you a millionaire overnight, there is certainly a few things I do to tip the odds in my favor. That's what I'd like to share with you guys today. As I've got older and slightly grayer, I've found that knowing the reasons behind why a stock might change in price has helped me make and save a lot of money. If you're new to the stock market, then a stock is a small part of a company and when you buy it, you actually become a part owner. The idea is to buy parts of a company that you believe will go up in value, so you're able to multiply your money without doing any extra work.

But, let's face it, investing in stock market can be pretty confusing and most people just pick companies on a whim. However, that's not how I do it. So, by the end of this video, you'll know my actual strategies for picking great stocks and don't worry, I won't be trying to sell you anything, so you can just sit back and relax. So, there are two main ways to attempt to predict the stock market.

These are called technical and fundamental analysis.

 

A good way to think about this is like a scale. Usually, short-term day traders are purely focused on technical aspects. These include looking at charts and patterns. They believe that they can predict how the stock will change in price by judging the highs and the lows on the graphs. They're the geeky ones. Nah, I'm only kidding. It's just not how I do it. My whole investment strategy is about keeping it simple. Lots of people talk about using margin and options, but that's really not something I worry about. I'm a long-term investor, so this means I'm a lot more focused on the fundamentals of a company.

This includes the financials, the leadership and the brand recognition, as I believe this is where the information lies to indicate the long-term success of a stock. However, like I mentioned, it's a scale.

So, I do cast my eye over the occasional chart in order to find the best time to buy. This approach has helped me to find some really good investments over the years, rather than just dipping in and out and trying to make a profit on a daily basis. The amazing thing is, the majority of professional traders are still unable to beat a low-cost index fund over the long term. This may sound quite complicated, but it's actually very simple. So, this bucket represents an individual stock and the water is me pumping all of my money into that company. This represents an index fund, each cup being a different company. And the water I'm putting in is the money I'm spreading between each of them in one easy investment. For whatever reason, if this company goes bankrupt, then guess what?

All my money goes down the drain. Now, this is the same company and it still goes bankrupt. But, the good thing is, I might lose my money in that small investment. However, I've got so many more stocks and I've done really well in some of them, which means I've actually made a profit overall. My favorite index funds track the S&P 500, which are the top 500 public companies in the USA. So, even though the majority of my money goes into index fund investing, I also have a lot of fun picking individual stocks and watching my portfolio grow. On this note, if you'd like an easy way to get started, Public are currently giving away a free stock worth all the way up to $50 when you fund your account. If you want to pick that up, I'll leave a link in the description. And if you're in the UK, Freetrade are giving away a free stock that could be worth up to £200 when you deposit as little as £2. I'll leave that link below as well.

It's a great way to get started with individual stocks and basically, it's free money. Right, so now you got your free stock and you're ready to invest into some more. But, where should you start? Well, if you're anything like me, it makes sense to start with the numbers. We call this quantitative analysis.
Whenever I'm thinking about investing in a company, I make sure to look at all these figures first. If the financials don't look good to me, then it's very rare that I'll do any further research into the company. It's kind of like when you go on a first date with someone and they seem really nice. However, it isn't until you really start getting to know all the details about them that you might start to notice their flaws, like eating with their mouth open or picking their nose.

If only they gave you a non-biased comprehensive list of how they actually are, so you can make an educated decision whether you want to date them or not.

I don't have a solution to this problem, but luckily that's exactly what companies do. It's brilliant. You can find out this information for free on Yahoo Finance, which is the website that I use. There are three main aspects that I look at. First, let's break down the balance sheet. I know it doesn't sound too interesting, but trust me, this is where you find some of the real juicy information. The whole purpose of this sheet is in the name, to balance assets and liabilities.

Think of it a bit like this. You may own a watch or a rental property, and these are your assets. But let's say you have loads of credit card debt. This is one of your liabilities....

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