Getting started with a stock portfolio is nowadays very easy to do because there are many brokers, websites, and stock tracker apps available to support you in completing the right documentation and selling and buying stocks. However, you might not know what to buy yet since there are so many options.
Understanding the market
Understanding the market requires knowledge, time, reading, and patience. You can invest short-term in stocks, but this will not create significant wealth. It might even result in even riskier stocks. According to the book Intelligent Investor, three principles should be considered:
- Analyze for long term investments, since the short and medium-term can be very irrational
- Protect yourself and try to avoid losses by diversifying the investment portfolio
- Do not go for unreasonable profits, because when it seems too good to be true, it often is. You should focus on safe and steady return investments.
Getting to the right stocks
Although nobody can predict the next best stocks, everybody can protect themselves from losses. Therefore, choosing the right stocks for your portfolio is very important if you want to make a profit in the long term. Keep in mind that to become an intelligent investor, you should rely on your research and ignore the market. People believe they are good at recognizing patterns, while sometimes none exist.
Parameters to choose stocks
Below is a list of parameters to take into account, which could help you scrutinize the quality buys from the others.
- The company’s business model and its longevity
- Historical track record (i.e. debt-to-equity ratio)
- Valuation and capital efficiency
- Sector the company is performing in
- Quality of the management principles
- Low-cost producer and high entry barriers
- Dividend stocks
Starting your portfolio
Once you study the shares according to the above parameters, focus on the volume of the shares by researching via different websites which shares were purchased and which ones were being sold in bulk. This helps you to understand when to invest and/or sell. As the next step, we focus on the second principle of the intelligent investor, we need to try avoiding losses. The best way to do this is when you diversify your portfolio with different stocks from different companies. This way you are not betting on one horse and you are spreading your chances instead.
Real-time insight into your assets
If you start creating your portfolio, it is recommended to use a Stock Tracker App. Multiple applications can provide you an overview of all the stocks you have including business news and analyses. Delta is for example using an API to retrieve real-time data, but also historical data on stocks from existing sources like Nasdaq, New York Stock Exchange, Euronext Group, London Stock Exchange, and so on. The stock tracker app is therefore very helpful to get on top of your investments instead of visiting each site individually.