How long have you been investing? Whether you are a novice or a seasoned investor, you’re going to make mistakes. You aren’t perfect and neither is the market. That is why you need to make calculated and educated decisions. One of the things I picked up along the way is the more you trade, the bigger chance you have of losing money. That means it’s better to take on a buy and hold philosophy, but it still matters what you’re holding of course.
In hindsight, I should have done much better with buying and holding. As an investor, I am attempting to do that now. As mentioned, it is also important to choose the right investments. When looking at stocks, a good rule of thumb is to first stay away from penny stocks. You want to pick companies that are doing well financially, and penny stock companies are often not in that category. You still want to find stocks at a value though, and the metrics really matter.
You want a company that is financially stable. You want a company that is growing. As a buy and hold investor, you might want to choose stable companies that pay dividends and have a solid track record. Many people pick companies that they want to hold for the short term. Yet if they screen with the perspective of holding for the long term, they realize that they wouldn’t choose those stocks.
You want to make wise investment decisions. One metric I look at is earnings per share or EPS. I also pay attention to the P/E ratio or price to earnings ratio. It’s nice to look at the dividend history for a company as well in order to see if there is a history of increases. There are a ton of other metrics to look at, but let me be very clear. The more stable blue chip type companies you pick, and the longer window you have, the less you have to scrutinize your stock picks like a day trader.
That doesn’t mean you don’t screen them. It doesn’t mean you don’t scrutinize your picks in order to make wise investments. However, you can take things too far, sending yourself in circles if you look at too much data. You have to make your picks and turn the market off. If you follow the market too closely these days, you’re going to be buying and selling like a day trader. That’s not what you want to happen. You want to make good investments and build by compounding. Click here to learn more about good investments.