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5 Crucial Rules to Follow When Choosing Stocks

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Share markets are on a roll and you might be tempted to dip in the action, and make some money. If you are not a seasoned investor and are trying for the first time, it is better not to go by your own intellect. Instead, take the help of financial advisors from companies like Rothenberg Capital Management.  Visit Rothenberg.ca. They can help you build your portfolio in a manner that can lead you to success. So when you consider investing here are five rules that will help you choose the right stocks.

  1.    Start with the Business You Understand: It is immensely important that you target companies that do business in your comfort zone. Unless you understand the business, there is no point in putting your hard-earned money in buying shares of a company in that sector. If you are not aware of any particular sector specifics, it’s better to go with companies that have straightforward, easy-to-understand business models.
  2.    Go with the Leaders of the Pack: Best not to invest in underdogs unless you understand the company and have full faith in its potential.  It’s better to invest in the established brands.  
  3.    Go with Large Caps or Mid Caps: Being new to the industry, it’s better to go with large companies rather than putting your money in small caps or penny stocks, which have high risk. In case the market conditions go bad, the big players have a better appetite to digest it rather than the small ones.
  4.     Don’t Jump for Cheap Stocks: It’s a universal truth in the share market that “Cheap isn’t always good, and expensive isn’t always bad.” A good stock can be available at cheap valuations due to varied reasons.
  5. 5.    Don’t Follow the Recommendations Blindly: Access the financial health of the company and don’t just go blindly with the hype that is often created around a particular sector. A lot of investors lost money during the dotcom bubble. Therefore, be sure to do your homework before making any investment.

Investing is a never-ending learning process, so don’t hesitate to educate yourself before taking a plunge in the stock market.

 

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