Constructing a winning stock portfolio requires time, patience, and a lot of research! As a trader, you must do your groundwork on the stock you want to bet on. Learning how to appraise stock’s the ‘Buffet way’ can help you build a killer portfolio that will put you ahead in fantasy trading contests. Let us teach you how to do it quickly.
Understanding the Different Types of Stocks
The first thing to do when building your hot new portfolio is to pick stocks. So how do you know the perfect stocks to pick? There are different categories of stocks and each of them moves differently. There are stocks perfect for long-term investing and stocks suitable for short-term trading. Knowing the differences between them can help you make more accurate trades. Also, selecting the right type of stock that suits your trading strategy will help you narrow down your portfolio.
Participating in fantasy finance contests means that you will be applying short-term trading strategies. So selecting stocks that complement this purpose will be very good for your portfolio.
The various classes of stocks include growth stocks, value stocks, dividend stocks, Non-dividend stocks, IPO stocks, cyclical stocks, Blue-chip stocks, etc. For short-term trading, growth stocks are usually the best type of stocks to pick. They feature most tech companies like Tesla (NASDAQ:TSLA), Alibaba (NYSE:BABA), Netflix (NASDAQ:NFLX), and more. These stocks are being traded constantly and are likely to see major price movements within a day. Also, Blue-chip stocks are filled with established companies with a solid foundation like Johnson & Johnson, Microsoft, and Disney. These stocks are also great for short-term trading but do not expect significant price movements from them.
Conduct Your Fundamental Analysis
I know you’ve probably heard this a lot. But what does it actually mean? In simplest terms, fundamental analysis means examining a stocks’ intrinsic value. To do this, you will need to analyze the bedrock of the company. What services do they offer? Are they key industry players? Its balance sheet, news on the company, new initiatives, management, critical figures, and so much more. It essentially means analyzing the core of a business.
Any investor or trader who knows their stuff must conduct fundamental analysis on a stock before betting on it. It doesn’t take up as much time as you think! Doing quick research on the internet can get you all the appropriate information you need. In just a matter of minutes, you can find out the latest news and happenings on a company’s stock. You can also compare a company’s net revenue for the current year against its past years to determine future growth. It’s easy to find stock data on platforms like Yahoo Finance and Techcrunch.
Use this stock-picking strategy when competing in fantasy finance contests to get ahead of the competition. For example, on a fantasy trading platform like StockBattle, you will be expected to choose five stocks to bet on in a 1-hour contest. Conducting your fundamental analysis quickly before choosing your stock picks can help you earn the most points and win the prize pool. The goal is to choose stocks that will rise within the hour, and doing your research will play a vital role in helping you pick the right ones. Also, a well-researched and unique portfolio enables you to stay ahead of other players.
Follow and Track News Trends
Tracking stock news and trends is probably one of the easiest ways to build a winning portfolio after narrowing down the perfect types of stocks to buy and conducting your fundamental analysis. Check for news updates on the stocks to be sure of the ones to bet on. News can affect the price of a stock, so do not underestimate this helpful trading tip. Coca-Cola’s (NYSE:KO) shares once traded low because Cristiano Ronaldo, a popular soccer player, decided to pick bottled water over their famous drink!
News influences stock price so follow your local news outlets on social media and offline to stay in the loop.
Diversification and More Diversification
You’ve probably heard about the importance of having a diversified portfolio, but you maybe are not too sure how to go about it. Diversification simply means selecting stocks from different industries for your portfolio. Just think, as you need a balanced diet to get the most nutrients from your meals, you also need a balanced portfolio to help you profit more. A combination of tech stocks, banking stocks, retail stocks, growth stocks, and more will make for a balanced portfolio.
Warren Buffet’s take on diversification is that not more than 30% of your portfolio should contain one sector or industry. The purpose of diversification is to bring balance when one industry suffers a loss. Using this technique will put you ahead in fantasy trading contests.
Through analyzing a company’s stock and balance sheet statements, you can project its future growth. Also, combining fundamental analysis with the P/E ratio and fully diversifying your portfolio makes for a foolproof portfolio that can help you profit even more. As you know, Buffet is renowned for discovering stock potentials, having bought the Fortune 10 company, Berkshire Hathaway, when it was only a textile milling company in 1965. So his advice on trading is invaluable.
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