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Eli
Student
3
Questions
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How do you decide what stock to invest money in?
I am 11th Grader at Grundy Center High School
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2 answers
Eddie F
Product Manager
2
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Sammamish, Washington
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Eddie’s Answer
Hi Eli, investing in stocks can offer good returns, but it comes with risks.
Your decision should be based on your risk tolerance and understanding of investing. A popular approach is to invest in S&P 500 Index Funds or ETFs, which aim to mimic the performance of the 500 largest companies in the U.S. stock market. This allows you to invest in a broad range of stocks with just one investment, helping to spread your risk—a concept known as diversification.
There are various S&P 500 funds/ETFs available, so check financial websites for options with low fees.
Your decision should be based on your risk tolerance and understanding of investing. A popular approach is to invest in S&P 500 Index Funds or ETFs, which aim to mimic the performance of the 500 largest companies in the U.S. stock market. This allows you to invest in a broad range of stocks with just one investment, helping to spread your risk—a concept known as diversification.
There are various S&P 500 funds/ETFs available, so check financial websites for options with low fees.
Zurum Okereke
Tech Product Manager
1
Answer
New York, New York
Updated
Zurum’s Answer
There are different approaches to choosing stocks, but it often starts by asking a few key questions, such as:
What’s your investment timeframe?
What’s your financial goal?
These will guide your decision-making process. Here are a few common stock investment strategies, along with examples:
Everyday Stocks
Invest in companies whose products or services are used daily and have been around for a while. These companies may not have high growth but are usually stable and pay dividends—extra money for owning the stock.
Example: Coca-Cola – A very strong brand with products sold around the world. While it may not see explosive growth, it’s a stable company that pays a consistent dividend.
Example: Procter & Gamble – Known for everyday household items we use such as paper towels, cleaning products, and more it’s another reliable stock with solid dividends.
Growth Stocks (High Potential)
Focus on sectors that are shaping the future. Identify trends like how people communicate, travel, eat, adapt to technology, and more. These companies often reinvest their profits into growth, so their stock price could rise faster, though they may not pay dividends.
Example: Tesla (TSLA) – With electric vehicles revolutionizing the auto industry, Tesla has seen significant growth by being at the forefront of this change.
Example: NVIDIA (NVDA) – A key player in the development of graphics chips for gaming and artificial intelligence, crypto-mining it's part of the rapid technological evolution.
Example: META (META) - A leader in the Social Media space for years now is now leading the charge in Mixed Reality with the Oculus and other Mixed Reality products.
Undervalued Stocks (Opportunistic Buying)
These stocks are currently priced below their usual value, offering a potential bargain. However, you need to understand why the stock is undervalued. Is it due to short-term challenges or fundamental problems? Use stock chart analysis to determine the right time to buy based on positive price action and volume trends. YouTube has a great set of tutorial videos to understand price action and volume.
Example: Disney (DIS) – Recently, Disney stock has dropped due to challenges in the streaming business and theme parks, but the company has strong assets and brand power. If you believe it can bounce back, this would be undervalued opportunity.
Regardless of which strategy you choose, your MINDSET is key. Successful investing requires patience, attention to detail, and staying open to learning and being wrong. Your mindset to investing can be a reflection of your mindset to how you approach life. Stick to your rules, maintain discipline, and always look for opportunities!
Note that none of this is Financial Advice and it's always important you do your research.
What’s your investment timeframe?
What’s your financial goal?
These will guide your decision-making process. Here are a few common stock investment strategies, along with examples:
Everyday Stocks
Invest in companies whose products or services are used daily and have been around for a while. These companies may not have high growth but are usually stable and pay dividends—extra money for owning the stock.
Example: Coca-Cola – A very strong brand with products sold around the world. While it may not see explosive growth, it’s a stable company that pays a consistent dividend.
Example: Procter & Gamble – Known for everyday household items we use such as paper towels, cleaning products, and more it’s another reliable stock with solid dividends.
Growth Stocks (High Potential)
Focus on sectors that are shaping the future. Identify trends like how people communicate, travel, eat, adapt to technology, and more. These companies often reinvest their profits into growth, so their stock price could rise faster, though they may not pay dividends.
Example: Tesla (TSLA) – With electric vehicles revolutionizing the auto industry, Tesla has seen significant growth by being at the forefront of this change.
Example: NVIDIA (NVDA) – A key player in the development of graphics chips for gaming and artificial intelligence, crypto-mining it's part of the rapid technological evolution.
Example: META (META) - A leader in the Social Media space for years now is now leading the charge in Mixed Reality with the Oculus and other Mixed Reality products.
Undervalued Stocks (Opportunistic Buying)
These stocks are currently priced below their usual value, offering a potential bargain. However, you need to understand why the stock is undervalued. Is it due to short-term challenges or fundamental problems? Use stock chart analysis to determine the right time to buy based on positive price action and volume trends. YouTube has a great set of tutorial videos to understand price action and volume.
Example: Disney (DIS) – Recently, Disney stock has dropped due to challenges in the streaming business and theme parks, but the company has strong assets and brand power. If you believe it can bounce back, this would be undervalued opportunity.
Regardless of which strategy you choose, your MINDSET is key. Successful investing requires patience, attention to detail, and staying open to learning and being wrong. Your mindset to investing can be a reflection of your mindset to how you approach life. Stick to your rules, maintain discipline, and always look for opportunities!
Note that none of this is Financial Advice and it's always important you do your research.