FFB-Post 6
With over 5,000 companies listed on the National Stock Exchange (NSE) in India, deciding where to start can be overwhelming. Don’t worry, I’ve got you covered. In the next few posts, I’ll help you narrow down your focus and guide you through the process of finding good stocks.
How to Start Finding Good Stocks?
Define the Qualities of a Great Stock
First, you need to identify the qualities you believe make a great stock. Here are some examples to help you get started:
Example: Apple
- Profitable Business: Consistently generates significant profits.
- Loyal Customers: A strong, dedicated customer base.
- Ahead of Trends: Innovates and sets market trends.
- Market Leader: Dominates its market segment.
- Growth Potential: Continues to show promising growth prospects.
Now, it’s your turn. Think about the qualities that are important to you and make a list.
Where to Find Such Stocks?
Here are some practical tips to help you identify potential stocks:
- Visit Shopping Malls: Observe which stores are bustling with customers. High foot traffic can indicate a popular and profitable business. This is literally how Warren Buffet did before purchasing Coca-Cola & American Express
- Daily Purchases: Take note of the items you buy regularly and the companies that produce them. Companies with products you and others frequently purchase might be worth considering.
- Seasoned Investors: Research what successful investors are putting their money into. Their choices can provide valuable insights.
- Social Outings: Pay attention to where you and your friends spend money. For example, if you often eat at Domino’s, the company might be a good stock to consider.
Additional Tips:
- Industry Research: Dive into industries you’re interested in or have knowledge about. Understanding the sector can give you an edge in identifying good stocks.
- Financial News: Stay updated with financial news and trends. This can help you spot emerging opportunities and understand market sentiment.
- Company Reports: Read annual reports and financial statements of companies you’re interested in. Look for consistent performance and strong fundamentals.
By performing these exercises and observing your environment, you’ll start to develop a list of potential stocks that align with your criteria.
Conclusion
Starting your investment journey can be daunting, but by defining what makes a great stock and knowing where to look, you can begin to build a focused list of potential investments. Remember, investing is about making informed decisions based on careful observation and research.
Coming Up Next: The Circle of Competence
In the next post, we’ll discuss the concept of the Circle of Competence and how it can help you make informed investment decisions.
Stay tuned for more insights and tips on how to become a savvy investor.
For Post 7 – Click Here -> The Circle of Competence