Is there a science to picking stocks? It depends on who you ask. Indeed, almost anyone would tell you that there is a science, but another way to answer that question would be conditional. Yes, there\u2019s a science, but you need to have a certain amount of money to begin considering it. The stock market\u2019s tough territory to conquer, and it\u2019s worth taking a close look at whether it\u2019s the best field of investment for you.<\/p>\n
When people hear the word \u201cinvesting,\u201d usually one of two things comes to mind: savings accounts or stocks. The first is perhaps a more passive way of investing \u2013 a safe bet that\u2019ll keep your money on-hand for when you need it, very slowly gaining value, but gaining nonetheless. The second option is our more complicated subject of consideration, but these two answers don\u2019t constitute the whole of what it means to invest.<\/p>\n
No, as Scott Trench at BiggerPockets points out, there are other options about which you should be thinking. For Trench, in fact, if you\u2019re worth less than a full million dollars, you can forget about playing the market. Instead, you\u2019d be better off investing in real estate or small businesses<\/a>.<\/p>\n Many have never considered these possibilities as major modes of investment. Others may think that it takes more money to invest in real estate than in stocks. But unless you\u2019re doing the legwork to see what\u2019s available, you haven\u2019t fully considered your alternatives.<\/p>\n Related:<\/strong> Why Warren Buffett\u2019s Stock Picking Methodology is Outdated (& Real Estate is the Best Investment)<\/a><\/em><\/p>\n You probably shouldn\u2019t be playing the market if you can\u2019t answer a few basic questions about the process. At the end of the day, this is about the money that\u2019ll keep you afloat in your old age, the money that makes up your livelihood, and you can\u2019t risk that.<\/p>\n The key questions, in terms of investing, are different according to different experts, but ultimately, they\u2019re about your foundational knowledge of how investment works. For Joshua Kennon, the most important question you need to be able to answer<\/a> before diving in to the investment process is, “How much is a fair price?” As he puts it, \u201cA great company is a terrible investment if you pay too much for it.\u201d<\/p>\n Even if you can answer fundamental questions about investment, you may still have a difficult time choosing the right stocks. One way to approach the process is through specific strategies. One market expert at Amigobulls recommends a strategy<\/a> based on social media. This is obviously a newfangled strategy in terms of playing the market, but is there anything to it?<\/p>\n As it turns out, there does seem to be some proof to the process. One study linked Facebook \u201clike\u201d rates to stock price changes, while another used Twitter data and charted trends more reliably than the Dow Jones. These strategies, however, take a lot of time and energy, and at the end of the day, they may not be worth the effort poured into them, especially if you don\u2019t have much money to put toward the resulting conclusions. You may just be better off going by instinct, as Joel Johnson at Forbes recommends; all of this effort just tends to miss the easy buys<\/a>.<\/p>\n All of the considerations that go into buying stocks can quickly start to feel excessive, particularly if investing isn\u2019t your life\u2019s passion. But if you still want to play the stocks, don\u2019t forget about index funds. These funds follow larger market trends and don\u2019t require the kind of detailed consideration that individual stocks require. However, index funds tend to grow slowly and may be no better than sticking your money in the bank \u2013 and, in fact, the results can be worse.<\/p>\nAssess Your Knowledge<\/h2>\n
Consider Strategies<\/h2>\n
Don\u2019t Forget About Index Funds<\/h2>\n