Aug
11
How To Pick A Good Stock
Filed Under Entrepreneurship, Money | 20 Comments
Are you a web programmer familiar with LAMP stack and want to work from home? Please fill out an application here! Full time job, salaries range from around $1,000-$6,000/month.
Walk around and ask some random people about stocks, and you’ll hear a lot of “I bought this stock at $5 and then sold it when it got to $10 and made $10,000!” or “I bought this stock at $5 and now it’s so low I don’t want to look at it”. These are people who sell when the stock is up, and hold on when the stock is down. At least, this seems like how most people interpret “buy and hold”. It seems strange though. Are they selling based on how much they’ve made/lost? Or based on the price of the stock? Or based on the news that everyone knows? How exactly does that make money?
To see what a good stock is, we should start by examining where the money in the stock market comes from. Afterall, if you’re going to make money, you should know where the money is coming from so that you can be secure in knowing it’ll keep coming! In its simplest form, a stock is a just a piece of a certain business. They’re giving you a piece because you’re giving them (theoretically) an equivalent amount of money so that the business can be expanded. This piece can then be resold to other people as you please.
Then the question becomes, how do businesses make money? Well, we can start with the articles Do You Get Money and How To Come Up With A Good Business Idea. When it comes down to it, business make money because they make a product or provide a service to someone that is worth more than the money being paid for the product/service. This is the basic concept of creating value. Two entities have something each other want; they exchange and are both better off. Say each person has $500 worth of stuff to trade. After the trade, each person now has $1000 worth of stuff to trade. That’s the power of a good trade – that $1000 of value just appears out of thin air.
Compare this with a business that tries to hammer out some sort of small edge. For example, walking around all day looking for loose change can be considered a business (or maybe looking for cans, or begging people for money). In this business, not much value is created, except maybe some minor garbage cleanup. Therefore, after you’ve picked up some guy’s change, he’s not going to come back to you and say, “Oh, please, here’s some more change that I’d like to drop so that you can pick up”. The problem is the “fixed pie”. In order for you to gain a nickel, somebody has to lose a nickel. Well, people only have so many nickels to lose 
However, in a more mutually beneficial environment, when you give up a nickel, you get two nickels worth of stuff back. Now, you can turn those two nickels worth of stuff back into nickels, so you can get 4 nickels worth of stuff. That’s when your customers keep coming back for more. It’s like nickels dropping out of the sky. Where do these nickels come from though? Well, whatever it is you’re doing that’s turning those 2 nickels worth of stuff into 2 actual nickels, that’s something somebody values. Otherwise, they’d just go to the guy you’re getting the 2 nickels worth of stuff from, and do it themselves. That’s the extra money from the value you’ve created (which you’re getting the big part of). Why wouldn’t your customers keep coming back? They’re getting all that “free” value just like you are!
Now you know what kind of business you should invest in. Take a look at the business model of the company behind the stock. Is it creating real value for the people who buy the product? Are they happy with the money they’re paying for it? Will they come back for more? Listen to the CEO when he speaks. Is he dedicated to bringing their customers more value, or just interested in making the stock price goes up while he cashes out?
On that note, remember that stocks that have lots of news releases and updates aren’t necessarily good stocks, especially if they’re small. Sure, they’re keeping wall street well connected so that their stock price is of fairer value, but wall street isn’t their customer! What good is it to know exactly how much money the company is making if they’re on their way to being bankrupt? I’d rather have a big surprise every couple of years where they tell wall street, “Oh, by the way, we’re actually making 3 times what you expected”, and the stock price shoots up. Money made is money made whether wall street knows about it or not. I’d rather they focus on their customer relationships than on wall street relationships.
Once you’ve found such a company, just make sure the price isn’t ridiculous, and put your money in. Then, don’t look at it again for at least a year. You bought the company because it’s creating value remember? A week from now, it’s still going to be doing just that, so don’t worry about it. Just go do something else and let that extra value build up!
I’ll further elaborate on when to sell in Why You Should Invest For the Long Term.
If you feel that this post has been of value to you, please leave a donation to show your appreciation and allow me to bring this value to other people as well!
Ask a question or discuss this post in the personal development forum.
Related Posts
Why You Should Invest For The Long Term
Stop Checking That Stock
How To Learn To Make A Good Investment
Stop Waiting For The Phone To Ring
A Lesson From Warren Buffet On How To Invest
Why Not To Drive
Grow Your Pile Of Money
About Warren Wong
A Change In Article Writing Plans
Why Generosity Creates Wealth Day 5: Making Money Through Branding
Free Personal Development Email Updates
Not sure when the next article will appear?
Why not subscribe to email updates and get articles delivered to you instead?
[...] Articles Why You Should Invest For The Long Term Make People Comfortable By Greeting Them Right How To Pick A Good Stock Stop Waiting For The Phone To Ring Stop Checking That Stock 8 Starting a New Job Tips How To See [...]
What it says by CEO is often not what he/she does. What if CEO or the entire management team changed?
I guess CEO’s pitch is not the most important, organizational culture is the most important to look at…
But, how do you measure culture?
Culture survey??? No listed companies will allow any independent organization to audit their culture and publish the results…
So..what are you suggsting???
Well, if the guy was really passionate about his work, there’s pretty much no way he’d step down from being a CEO. Can you imagine Warren Buffet not being affiliated in some way with Berkshire?
You can measure culture from pretty much any part of the company. Listen to the management team on conference calls and see how they sound. Research the history of the management people to see if they’ve worked for like 15 different companies in the last number of years. Call up the company and see what the employees sound like. Are they happy, sad, pissed off?
Basically, do they sound like upstanding citizens offering other citizens a long term service?
I want to make some money by trade stock. How to pick up a good stock?
i want to do something new with my life.
I think http://www.sourcingasian.com is a good supplier for company or people which wanna import or dropship Mobile phone & accessories, Ipod & Iphone3G Accessories, Computer Accessories, MP3,MP4 and other consumer electronics.
i think stocks are really stupid idk why they even exist.. i hate them soooo much…. but wat i love to do is have sex with my bf he does it soo good.. i love to suck his dick hahahah=0 and i love it when he lick ma pussy hahahah…. if u want some of me hit me up at 5033908104 ill be waiting hahahah
[...] Wong presents How To Pick A Good Stock posted at Personal Development for INTJs, saying, “Do you know how to pick a good stock? [...]
[...] How To Pick A Good Stock Do you know how to pick a good stock Heres how to find a good long term investment!… [...]
[...] How To Pick A Good Stock Do you know how to pick a good stock Heres how to find a good long term investment!… [...]
THIS IS SO STUPIDDD.(:
people needa get a lifee.(:
yo mama so greasy she uses bacon as a band aid.(:
THIS is boreing i do not like green eggs and ham says ham old sam airplanes in the night sky like a shootin starsss!
hehe(: TERD
i love thisss.(: i like the comment abovee.(:
SO i like how there is weird comments aboveee.(: i hate some people like ARIANA FLOYD.(:
Interesting points, I like it
do i need min money to invest?
very good post, i was really searching for this topic as i wanted this topic to understand completely and it is also very rare in internet that is why it was very difficult to understand
thank you for sharing this.
Regard
Stock Market
You are frustrated, sad and lonely, and sometimes you feel nobody cares. If you feel you are stuck in the wilderness in a situation that appears hopeless, you should know that you’re not the only person this has happened to. And there is something you can do about it! Sometimes bad things happen to good people, and it appears whatever they do, they can’t get out of the quagmire. If this describes you, don’t give up. The situation is not hopeless. The prophet of goddess spells can turn things around for you,be it lost love,make someone sexually attracted to you,lose weight,stop smoking,get a promotion or raise or come into huge money,alter your future to bring forth happiness and success. Email me today for a better life on prophetofgoddess@yahoo.com or view my website on http://www.prophetofgoddess.com.
Personal Development
by an INTJArticlesLife HappeningsPoetryReading ListForumDonateAbout
Email Updates
Enter your email address:
Finance Articles
Do You Get Money?
Grow Your Pile Of Money
The Life Pursuit Of Money
How To Convert Your Time To Money
How To Pick A Good Stock
How To Find A Good Investment
How Much Money Is Integrity Worth?
Why You Should Start Saving Money Today
Why You Should Invest For The Long Term
Career Articles
Be A Good Manager By Letting People Learn And Grow
8 Starting A New Job Tips
How To Interview For A Job
How To Ask For A Raise
How To Get Your Partner To Do More Work
Subscribe in a reader
Aug
11How To Pick A Good Stock
Filed Under Entrepreneurship, Money |
Are you a web programmer familiar with LAMP stack and want to work from home? Please fill out an application here! Full time job, salaries range from around $1,000-$6,000/month.
Walk around and ask some random people about stocks, and you’ll hear a lot of “I bought this stock at $5 and then sold it when it got to $10 and made $10,000!” or “I bought this stock at $5 and now it’s so low I don’t want to look at it”. These are people who sell when the stock is up, and hold on when the stock is down. At least, this seems like how most people interpret “buy and hold”. It seems strange though. Are they selling based on how much they’ve made/lost? Or based on the price of the stock? Or based on the news that everyone knows? How exactly does that make money?
To see what a good stock is, we should start by examining where the money in the stock market comes from. Afterall, if you’re going to make money, you should know where the money is coming from so that you can be secure in knowing it’ll keep coming! In its simplest form, a stock is a just a piece of a certain business. They’re giving you a piece because you’re giving them (theoretically) an equivalent amount of money so that the business can be expanded. This piece can then be resold to other people as you please.
Then the question becomes, how do businesses make money? Well, we can start with the articles Do You Get Money and How To Come Up With A Good Business Idea. When it comes down to it, business make money because they make a product or provide a service to someone that is worth more than the money being paid for the product/service. This is the basic concept of creating value. Two entities have something each other want; they exchange and are both better off. Say each person has $500 worth of stuff to trade. After the trade, each person now has $1000 worth of stuff to trade. That’s the power of a good trade – that $1000 of value just appears out of thin air.
Compare this with a business that tries to hammer out some sort of small edge. For example, walking around all day looking for loose change can be considered a business (or maybe looking for cans, or begging people for money). In this business, not much value is created, except maybe some minor garbage cleanup. Therefore, after you’ve picked up some guy’s change, he’s not going to come back to you and say, “Oh, please, here’s some more change that I’d like to drop so that you can pick up”. The problem is the “fixed pie”. In order for you to gain a nickel, somebody has to lose a nickel. Well, people only have so many nickels to lose
However, in a more mutually beneficial environment, when you give up a nickel, you get two nickels worth of stuff back. Now, you can turn those two nickels worth of stuff back into nickels, so you can get 4 nickels worth of stuff. That’s when your customers keep coming back for more. It’s like nickels dropping out of the sky. Where do these nickels come from though? Well, whatever it is you’re doing that’s turning those 2 nickels worth of stuff into 2 actual nickels, that’s something somebody values. Otherwise, they’d just go to the guy you’re getting the 2 nickels worth of stuff from, and do it themselves. That’s the extra money from the value you’ve created (which you’re getting the big part of). Why wouldn’t your customers keep coming back? They’re getting all that “free” value just like you are!
Now you know what kind of business you should invest in. Take a look at the business model of the company behind the stock. Is it creating real value for the people who buy the product? Are they happy with the money they’re paying for it? Will they come back for more? Listen to the CEO when he speaks. Is he dedicated to bringing their customers more value, or just interested in making the stock price goes up while he cashes out?
On that note, remember that stocks that have lots of news releases and updates aren’t necessarily good stocks, especially if they’re small. Sure, they’re keeping wall street well connected so that their stock price is of fairer value, but wall street isn’t their customer! What good is it to know exactly how much money the company is making if they’re on their way to being bankrupt? I’d rather have a big surprise every couple of years where they tell wall street, “Oh, by the way, we’re actually making 3 times what you expected”, and the stock price shoots up. Money made is money made whether wall street knows about it or not. I’d rather they focus on their customer relationships than on wall street relationships.
Once you’ve found such a company, just make sure the price isn’t ridiculous, and put your money in. Then, don’t look at it again for at least a year. You bought the company because it’s creating value remember? A week from now, it’s still going to be doing just that, so don’t worry about it. Just go do something else and let that extra value build up!
I’ll further elaborate on when to sell in Why You Should Invest For the Long Term.
If you feel that this post has been of value to you, please leave a donation to show your appreciation and allow me to bring this value to other people as well!
Ask a question or discuss this post in the personal development forum.
Email This Post
Related Posts
Why You Should Invest For The Long Term
Stop Checking That Stock
How To Learn To Make A Good Investment
Stop Waiting For The Phone To Ring
A Lesson From Warren Buffet On How To Invest
Why Not To Drive
Grow Your Pile Of Money
About Warren Wong
A Change In Article Writing Plans
The Death Of Blockbuster
Free Personal Development Email Updates
Not sure when the next article will appear?
Why not subscribe to email updates and get articles delivered to you instead?
Enter your email address:
Comments
19 Responses to “How To Pick A Good Stock”
1.Why You Should Invest For The Long Term on August 16th, 2007 9:09 am
[...] Articles Why You Should Invest For The Long Term Make People Comfortable By Greeting Them Right How To Pick A Good Stock Stop Waiting For The Phone To Ring Stop Checking That Stock 8 Starting a New Job Tips How To See [...]
2.wema7300 on August 29th, 2007 7:46 am
What it says by CEO is often not what he/she does. What if CEO or the entire management team changed?
I guess CEO’s pitch is not the most important, organizational culture is the most important to look at…
But, how do you measure culture?
Culture survey??? No listed companies will allow any independent organization to audit their culture and publish the results…
So..what are you suggsting???
3.Warren on August 29th, 2007 7:51 am
Well, if the guy was really passionate about his work, there’s pretty much no way he’d step down from being a CEO. Can you imagine Warren Buffet not being affiliated in some way with Berkshire?
You can measure culture from pretty much any part of the company. Listen to the management team on conference calls and see how they sound. Research the history of the management people to see if they’ve worked for like 15 different companies in the last number of years. Call up the company and see what the employees sound like. Are they happy, sad, pissed off?
Basically, do they sound like upstanding citizens offering other citizens a long term service?
4.Henry Shwe on August 7th, 2008 8:50 am
I want to make some money by trade stock. How to pick up a good stock?
5.calvert dacosta on May 31st, 2009 11:25 pm
i want to do something new with my life.
6.michael on July 10th, 2009 7:59 am
I think http://www.sourcingasian.com is a good supplier for company or people which wanna import or dropship Mobile phone & accessories, Ipod & Iphone3G Accessories, Computer Accessories, MP3,MP4 and other consumer electronics.
7.MISS LIL ON3 on January 7th, 2010 10:49 pm
i think stocks are really stupid idk why they even exist.. i hate them soooo much…. but wat i love to do is have sex with my bf he does it soo good.. i love to suck his dick hahahah=0 and i love it when he lick ma pussy hahahah…. if u want some of me hit me up at 5033908104 ill be waiting hahahah
8.August 23 2007 Edition of the Carnival of Financial Planning | Personal Investment Management and Financial Planning Blog Directory on August 4th, 2010 9:36 pm
[...] Wong presents How To Pick A Good Stock posted at Personal Development for INTJs, saying, “Do you know how to pick a good stock? [...]
9.Best Penny Stock Picks, Hot Stock Tips 2009 > How to Pick Stocks . Making Money Trading Online | How To Pick Stocks Reviews & Toolbox on September 6th, 2010 10:44 pm
[...] How To Pick A Good Stock Do you know how to pick a good stock Heres how to find a good long term investment!… [...]
10.How To Pick Stocks, Online Stock Trading Reviews & Comparison > Online Trading Systems Help You Pick Stocks | How To Pick Stocks Reviews & Toolbox on September 18th, 2010 5:36 pm
[...] How To Pick A Good Stock Do you know how to pick a good stock Heres how to find a good long term investment!… [...]
11.Nothing on December 13th, 2010 7:33 am
THIS IS SO STUPIDDD.(:
people needa get a lifee.(:
12.Nothing on December 13th, 2010 7:34 am
yo mama so greasy she uses bacon as a band aid.(:
13.Sammie on December 13th, 2010 7:48 am
THIS is boreing i do not like green eggs and ham says ham old sam airplanes in the night sky like a shootin starsss! hehe(: TERD
14.BettyJoe on December 13th, 2010 7:51 am
i love thisss.(: i like the comment abovee.(:
15.kjdfhgjidfhkgjhduighdfjhguidfg.(: get at meee. on December 14th, 2010 7:38 am
SO i like how there is weird comments aboveee.(: i hate some people like ARIANA FLOYD.(:
16.Make Soap At Home on May 5th, 2011 10:31 am
Interesting points, I like it
17.david on May 14th, 2011 7:04 pm
do i need min money to invest?
18.Stock Market on September 22nd, 2011 4:22 am
very good post, i was really searching for this topic as i wanted this topic to understand completely and it is also very rare in internet that is why it was very difficult to understand
thank you for sharing this.
Regard
Stock Market
19.Prophet of goddess on April 5th, 2012 9:37 am
You are frustrated, sad and lonely, and sometimes you feel nobody cares. If you feel you are stuck in the wilderness in a situation that appears hopeless, you should know that you’re not the only person this has happened to. And there is something you can do about it! Sometimes bad things happen to good people, and it appears whatever they do, they can’t get out of the quagmire. If this describes you, don’t give up. The situation is not hopeless. The prophet of goddess spells can turn things around for you,be it lost love,make someone sexually attracted to you,lose weight,stop smoking,get a promotion or raise or come into huge money,alter your future to bring forth happiness and success. Email me today for a better life on prophetofgoddess@yahoo.com or view my website on http://www.prophetofgoddess.com