How do we pick a stock? Where to Buy them?

As we are exploring the vast world of stock-picking methodologies, we should address a few misconceptions. Many investors new to the stock-picking scene believe that there is some infallible strategy that, once followed, will guarantee success. There is no foolproof system for picking stocks! It's just better to think of stock-picking as an art rather than a science. How to Pick a Stock?

In general the best practice for buy and selling stocks, is to buy low and sell high. Sounds easy enough doesn’t it? Buy low. Whatever you choose to invest in, try to buy it when it's "on sale" -- that is, buy when no one else is buying. Because of the human (often irrational) element inherent in the forces that move the stock market, stocks do not always do what you anticipate they'll do. Emotions can change quickly and unpredictably. And unfortunately, when confidence turns into fear, the stock market can be a dangerous place. Buy “Low” and Sell “High”

Hold on tight. –It's easy to get spooked when you see the value of your investments plummet. If you did your research, however, you probably knew what you were getting into, and you decided early on how you were going to approach the swings in the market place. –When the stocks you hold plummet in price, update your research to find out what is happening to the fundamentals. Hold on Tight

Hold on tight. – If you have confidence in the stock, hold, or, better yet, buy more at the better price. But if you no longer have the confidence in the stock and the fundamentals have changed permanently, sell. –Keep in mind, however, that when you're selling your investments out of fear, so is everyone else, and your exit is someone else's opportunity to buy low. Hold on Tight

Sell high. If and when the market bounces back, sell your investments. Sell High

Avoid watching news about stocks. By the time news reports come in, it is usually already too late to take action. Stock news in general tend to get over- excited when the stock market rises, and panicky when the market falls, prompting you to buy high and sell low, which is exactly the opposite of what you should do. One can however learn to get a feeling for how the market interpret news and buy/sell based on so called sentiment. Warnings

Brokers-usually stocks are purchased through brokers. When you're looking for a broker, you have three distinct choices. From the most to the least expensive, they are: full- service brokers, discount brokers and online brokers. What differentiates them is the advice they provide and cost. Where to buy them?

Full-service brokers will call with stock ideas and back this advice with reports from their firm's research department. They'll keep an eye on your picks and let you know when they think changes are necessary. You may want to choose different kinds of brokers for different purposes. I believe that full-service brokers should get paid for their stock ideas. That seems only fair. But if you've done your research yourself, I don't see any reason to pay a hefty commission -- discounters probably are fine. Cost: Commissions are typically based on a percentage of your purchase (or sale) price. Full Service Broker

Discounters do less of this. While there's typically plenty of research available on the best online brokerage sites, it's up to you to dig for it. The nice thing about the way the brokerage world is shaping up is that you may be able to have both of those things in one account at one firm. Cost: Between $10 and $20 for a trade of 1,000 shares or less, and on average, discounters charge one-third the price of full-service brokers. Discount Brokers

Self-directed investing Cost: At $9 to $15 a trade, it doesn't get any cheaper than this. Online Brokers

At this point, you may be asking yourself why stock-picking is so important. Why worry so much about it? Why spend hours doing it? The answer is simple: wealth. If you become a good stock-picker, you can increase your personal wealth exponentially. Take Microsoft, for example. Had you invested in Bill Gates' brainchild at its IPO back in 1986 and simply held that investment, your return would have been somewhere in the neighborhood of 35,000% by spring of In other words, over an 18-year period, a $10,000 investment would have turned itself into a cool $3.5 million! (In fact, had you had this foresight in the bull market of the late '90s, your return could have been even greater.) With returns like this, it's no wonder that investors continue to hunt for "the next Microsoft".IPOinvestment So What’s the Big Deal?