Simple. Google the company and visit their site. See their financial reports and company profile. There you can assess if the company is growing strong or not.
You can also check the company through observation. Questions like, how big is the company and its subsidiaries (if any), how visible it is to public and their competition. Most likely, blue chip companies are dominating the industry that that they are involved in. They are market leaders.
As the old cliché goes, “Don’t put all your eggs in one basket.” Why? Because if the fox steals it, none would be left. In stock market, learn to invest in every industry.
As a rule of thumb, you should invest in a portfolio composed of financial, conglomerates, oil & mining, food, real estate and retail. The rationale behind this is risk distribution. When one industry fails, other industries are growing hence your loss is mitigated.
No matter what the scenario is, you should continue buying stocks and not sell it unless you need emergency funds. When you buy stocks for a longer duration of time, you are building an empire little by little and that is rewarding in the end seeing the results!
Invest in small, frequent amount. In this manner risk is evenly distributed per period and not in lump sum. The idea behind this is that, if you continuously buy stocks, the future market price is still way higher than the average price of the stocks.
As an example, say you bought Apple stocks 4 years ago at $750 a share. The following year, you bought it at $740. On the next year you bought it at $762, then $780.
Let’s say the market price today is $780. If you take the average price of your stock, that would be $758. Hence, your stocks has appreciated by $22 a share!
For four years, you bought Apple stocks at an amazing price of $758. Since the current market price is $780, you gained $22 per share. Sounds great, doesn’t it? Imagine if you have a hundred shares of Apple stocks. That would be $2,200 profit!
Glance In A While
While you can leave your stocks behind, perhaps it is better to monitor once a week and see how the market goes. You cannot afford to lose simply because of lack of supervision.
You wouldn’t know when bear markets happen and when your stocks are losing value so it is best to check regularly and take action before it gets worse. On the other extreme, it is not advisable to check your stocks every minute or so.
While stock market investing is risky, there are specific tactics to mitigate risks. If we embrace and manage fear in a different way, it could work to our advantage.
How about you, how do you manage risks in the stock market?
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Juan Investor is a personal finance and investing blog. We also cover a wide range of topics including e-commerce, entrepreneurship and cryptocurrency.