Part 9: How to Pick Stocks for Long term Investment

Choosing the right stocks for your investment portfolio can feel challenging, especially if you’re just starting out. In this article, we’ll show you easy steps to pick stocks for long-term investment so you can make smart choices.

This guide is part of the Financial Planning and Investment Series (FPIS), designed for beginners looking to manage their finances wisely and achieve their financial aspirations.

Types of Investment Strategies:

There are many investment strategies. Growth investing targets fast-growing stocks, while value investing seeks undervalued ones. Income investing focuses on regular dividends, and index investing aims for long-term steady growth.

Here, are some of the popular investment strategies, you should be aware about:

• Passive and Active Strategies: Choosing between hands-on management or a simpler, set-and-forget approach.
• Dividend Growth Investing: Investing in stocks that pay and increase dividends over time.
• Growth Investing: Focusing on stocks expected to grow faster than average.
• Index Investing: Buying funds that mirror the performance of a market index.
• Value Investing: Finding undervalued stocks and holding them for potential gains.
• Contrarian Investing: Investing in stocks that are out of favor with the market.
• Income Investing: Picking assets that provide a steady income, like bonds or dividend stocks.
• Momentum Investing: Buying stocks that have shown recent price increases to ride the trend.

Common Investing Terms & Concepts:

• Averaging Down: Buying more shares of a stock when its price drops to lower your average cost.
• Buy On Dips: Buying stocks when their prices fall, hoping they will go back up.
• 52W High / Low: The highest and lowest prices a stock has reached in the past year.
• Breakout Stocks: Stocks that go above a certain price level, showing a chance for growth.
• Multibagger Stocks: Stocks that grow in value many times over your original investment.
• Coffee Can Investing: Buying stocks and keeping them for many years without selling.
• Overvalued Stocks: Stocks that are priced too high compared to what they are worth.
• Undervalued Stocks: Stocks priced lower than what they are really worth, offering a chance for profit.

How to analyse stocks?

To analyze stocks, we need to evaluate their financial health, market trends, and company performance.

Fundamental Analysis is a analysis of a company’s management, business model, financial ratios, financial statements, and other metrics.

Technical Analysis in the stock market mostly used to predict future price movements based on historical data. Charts are used to spot trends and patterns in prices.

Fundamental analysis is ideal for long-term investments, while short-term investments rely more on technical analysis. Therefore, we will mostly focus on Fundamental analysis to shortlist stocks for portfolio.

Here are some of the popular websites, that we can use to analysis stocks’s financials and fundamental parameters.

• Screener.in
• Trendlyne.com
• TradingView.com
• TickerTape.in

Factors to Pick Stocks for Portfolio:

There are hundreds of factors to analyze when evaluating a stock, such as revenue, profit, sector, future trends, debt ratio, and valuation. It’s important to create your own checklist of key parameters to shortlist stocks. Here are some essential factors to consider as a reference.

Different approaches to pick stocks:

There are various approaches to picking stocks based on key parameters. Here, we’ll share two common approaches.

Approach 1: Using Screener:

1. Create a Screener based on your Parameters.
2. Exclude Stocks: Volatile History Chart, Cyclical or Volatile Sectors (Metals, Sugar Stocks), having Management Issues etc
3. Compare with Peer and Choose the Best ones

Approach 2: Shortlist (one by one) from Market Index:

1. Shortlist stocks one by one from index (Nifty 100, Nifty Midcap etc) based on key parameters.
2. Exclude Stocks: Volatile History Chart, Cyclical or Volatile Sectors (Metals, Sugar Stocks), having Management Issues etc
3. Compare with Peer and Choose the Best ones

Using these approaches, you should be able filter out 30-60% of stocks in step one based on fundamental parameters. Then, you can exclude few more stocks during manual review in second step. So, you will be able left with only a few stocks (maybe 20 or 100) which you are compare with their peers and choose the best ones.

Remember that there will be hardly any stock who can fulfil all of your parameters. Therefore, adjust few parameters or focus on stocks which fulfils most important parameters of your checklist.

Best YouTube Videos on Similar Topics:

• How to pick stocks by CA Rachana Phadke Ranade
• Basic Filter of Stock in 10 Mins – Stock Market for Beginners in Hindi by pranjal kamra
• कोई भी Share खरीदनेसे पहले ये सात (7) बाते जरूर चेक करना by STOCK MARKET CLASSES
• How to shortlist quality stocks in 2 minutes | Screener | English by Sahil Bhadviya

Financial Planning and Investment Series (FPIS) Playlist:

• https://youtube.com/playlist?list=PLE85wx0SzgYLQfvohDxWbyhNw4YjtKKlx&si=VzuixdhbGcN6MiC1

Disclaimer:
We are not SEBI Registered. Investing and trading in stock market, future and options, mutual funds, cryptocurrency, involve substantial risk of loss. Any such discussion or information provided here is for educational purposes only and before making any investment decisions, please consult with a financial advisor.