How do I choose good stocks to buy?

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asked Jan 19, 2017 in Investing by Argie (180 points)
How can I find good stocks to buy?

1 Answer

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answered Jan 19, 2017 by Rolf (200 points)

In my opinion, a market based ETF like QQQ, DIA or SPY that tracks these major market indices is the safest way for amateurs to invest in. 

This is because when you trade these ETFs, since they are tracking these major indices and therefore largely the market itself, you are not undertaking the idiosyncratic risk and secondary risk of investing in individual stocks. Idiosyncratic risk is the risk that the stock itself may not do well even if the market does, secondary risk is the risk that the industry that the stock is in may not do well even if the market does. 

By investing in these ETFs, which is simply something you buy which is exactly like a stock, you are undertaking only one out of the three investment risks, which is systemic risk. 

Systemic risk is simply the overall market risk which means that if you buy these ETFs, when the market goes up, you almost GUARANTEED to make money with it... this alone is something even professional stock pickers CANNOT guarantee you they can do! 

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