Investing in the stock market is a great choice if you want to make your money grow over time and reach your financial goals. However, it’s essential to know how to select the right companies to invest in to maximize your returns and minimize your overall risk. But before we get started on the best ways to pick the right stocks for your portfolio, take a look at these 7 top stocks to watch in October 2021.
1# Know your investor profile
There is no way you can focus on the right stocks without knowing your investor profile. A trader must create a portfolio that will suit his goals and budget. Consequently, the first step is to determine what kind of investor you are, where your risk tolerance lies, what your financial goals are, and how long you plan on keeping your positions open. Think about which of your personality traits are strongest, and how they affect your way of thinking, feeling, and potentially analyzing the markets to make investment decisions.
2# Determine your strategy
Once you know who you are as an investor, you can start working on your investment strategy and write down your investment plan. This plan describes all information needed to make informed investment decisions. You will have to decide how to analyze the markets, what kinds of setups to follow to open and close positions, what level of leverage to use (if any), the amount of money to invest in each position, where to place your protective trading orders, etc.
3# Be aware of price catalysts
The next step is to monitor price catalysts, so then you can take advantage of strong price movements. Depending on which activity sector you want to focus on, there might be different kinds of catalysts you will need to do research on, but there are some common catalysts you need to be aware of. For instance, earnings publications, launch of a new service/product, big contracts, expansion in a new market, development of big projects, new hires, and changes in monetary and fiscal policies are among the most important fundamental catalysts to watch out for.
4# Focus on liquid stocks
Being able to buy and sell stocks whenever you want at the target price shouldn’t be optional when you invest in the stock market. That’s why you should always focus on highly liquid stocks, so then it’s easier for you to enter and exit the market. Liquid stocks usually have higher volume, and they’re also cheaper to invest in than illiquid stocks.
Bottom line
Of course, there are other tips you can use to select the right companies to include in your portfolio, but these 4 rules are a great starting point when wondering how to pick the right stocks. Determine first your investor profile, your risk tolerance, your trading strategy, your goals, and your investment horizon. Then, monitor the right price catalysts and focus on highly liquid stocks to be able to spot the best opportunities. Also, always remember to diversify your portfolio to avoid being over-exposed to a single activity sector!