If experts are to be believed, to make money in 2023, investing in index funds will not be enough. You will have to master the art of stock picks. However, picking individual stocks is extremely risky. There are ways to reduce the risk – diversification, staying invested for a longer duration, etc. In this article, we will discuss the best stock-picking strategy for 2023. Before that, let us first get the basics covered.
Things to consider before picking stocks
Below are a few things you need to be careful of before picking stocks:
- Not picking stocks on recommendations: You will find many stock recommendations today on different online platforms. Never pick stocks based on random recommendations. More often than not, you will lose money.
- Know your risk: You must know your risk profile and decide how much you are comfortable taking. For example, small-cap stocks have higher risks than mid-cap and large-cap stocks. If you want to take a moderate risk, you may want to avoid high allocations to small-cap stocks. Once you know your risk capacity, you narrow down your options.
- Decide goals and timeframe: You may want to trade or invest for a long time. The stock-picking strategy will depend on how long you want to stay invested.
Best stock-picking strategy for 2023
Once you get sorted on the above, you can move to the next step – picking the strategy. Every strategy has pros and cons associated with it. As an investor, you must understand every strategy properly before you choose one.
Below are some of the best stock-picking strategies for 2023. We are only giving a high-level idea. These strategies have much more to offer than what we have covered.
Fundamental analysis: It is an evergreen strategy and will remain on the list in 2023, 2050, and 2100. The strategy is simple – you need to look for companies with strong fundamentals – you find the intrinsic value of the stock. If the stock is trading below its intrinsic value, it makes sense to invest in the company. If you want to hold stocks for the mid to short term, you can plan to invest in fundamentally strong stocks.
Qualitative analysis: The market will be volatile in 2023, similar to 2022. Investors looking for a short-term investment can opt for this strategy. In qualitative analysis, you try to evaluate a company from a qualitative standpoint and determine whether you should invest in it. We would say to pick companies whose business you understand. Next, look at their sales and earnings. You must figure out what the company does and how it makes money. Once you understand all of this, you can look at which companies may perform well in 2023 based on the current and expected future macroeconomics.
Value Investing: It is one of the best stock pick methods. The concept is simple – find companies trading below their inherent worth. Please note that value investing does not mean buying stocks that declined by 50% and therefore become ‘cheap’, and you buy them. There are a few parameters to the value of a company. For example, a company with low PE is considered a perfect fit for value investing. Another parameter that investors can consider is the PEG ratio. There is more to it, and investors must look at everything before picking this strategy for investing.
Growth Investing: In the previous strategy, you tried looking for companies that were, at present, below their apparent worth. Growth investing is the opposite of value investing. Here the focus is on the future potential of a company, with less emphasis on the present price. Growth companies are those that are expected to grow faster than others.
Before you go
Most investors are looking for stock recommendations today. There are two reasons for it:
- They don’t want to put in the effort to learn and implement the above strategies – they are looking for a shorter route.
- They don’t have enough knowledge to understand the concepts and make the most of the stock market.
In either case, investing in the stock market could be risky. If you fall into the above category and want to make money from the stock market, you can explore the AI-driven platform – Jarvis Invest and make your journey super-easy. The parameters we discussed in the first section, Jarvis takes care of them within the tool – You must check it to see the magic.