If we had a crystal ball and could tell you which shares were going to perform the best, we'd all be ba-jillionaires.
Unfortunately that's not how it works. There is no way to tell which shares are going to come out on top, or which ones are right for you. Everyone has their own set of unique needs, risk appetites and time horizons when it comes to investing and so its impossible to have a one size fits all solution.
There are, however, a few simple principals to help empower you to make those decisions on your own.
Consider the companies you use every day
Investigate the companies you know. Warren Buffet was a fan of this philosophy. Look at the companies you interact with every day and maybe even give a chunk of your salary to. At a very basic level you know what they do and how their business works. You may even know who the leadership is and what their management style and experience look like.
Every day of our lives we already invest in the brands and products we love. If I’m spending a large chunk of my hard earned money at a particular food retailer every month, I’m contributing to that company’s bottom line and ultimately sustaining that company’s growth. Doesn’t it then make sense to participate in the prosperity of that company? Well, you can by owning their stock, which translates into owning a piece of that business. When you own a piece of the listed entity, you can share in their profits through dividends and benefit from their growth, through an increase in the share price.
So with this in mind, your roadmap to your first share portfolio might just be your bank statement. By analyzing your monthly spend and identifying the companies where most of your spend are going on a monthly basis, you can construct a balanced, often well-diversified stock portfolio.
Geek out on research
Once you have a company in mind, investigate what kind of competitive advantage they might have over their peers. You might also want to know if and how often they pay dividends, what the leadership's vision for the future is and whether the industry the company is in has long-term growth prospects.
Our research portal is packed with juicy bits on international stocks, educational blogs and more.
Engage with your community
Follow reputable financial journalists and publications on social media, subscribe to their content and maybe even strike up a thread on Twitter with your peers. It can't do any harm to get different perspectives and insights to help inform your choices.
If you are not investing because you are scared that you are going to pick the wrong share here is something for you to think about:
- Imagine the risk of not investing at all and having the value of your money get eaten away by inflation year on year.
- Stick to the basic principles of being diversified.
- Start with small amounts and as you grow in your confidence and understanding you can increase them.
- Believe in yourself. There is no reason why you can't create a successful portfolio using your own smarts.
