How To Find Tomorrow's Winners
Don't waste your time and energy worrying about the big ones that got away, invest these two precious commodities to find tomorrow's winners.
If you are hunting for individual stocks or sectors, begin with an assessment of what people are going to need more of in coming years and try to find those companies that are leaders or trying to become leaders in those fields.
Some investors do not wish to mess with their portfolios and just wish to try a small short-term bet on something and that is perfectly okay (and probably prudent). The important thing is to distinguish between short-term speculations and long-term investments, because your objectives with the two will probably be different.
Your long-term investments could probably endure a 20% drop in value if you are holding them for 10 years or longer. A short-term speculative play with a loss of 10% might be too much of a loss because the idea of these plays is to get in and out very quickly. And if you take hits of 30-40% it won't be long before your speculative capital is gone.
Now is the time to think about the next big market plunge because sooner or later we know it has to hit. Some of the big name growth stocks may seem too high today, but if they begin to head lower for whatever reason you should begin to consider at what price level you might wish to enter them and commit to buying them.
And keep in mind that some people cannot make investment decisions because they think they can never do enough research in order to be sure about something. Now is the time to face reality: we can never be absolutely sure, all of our investments involve some degree of chance.
As long as something does not involve putting your entire investment plan in jeopardy, you might just want to go ahead and play one of your hunches. Often times your instincts are right and when they aren't, you can learn something that may help you make smarter decisions down the road.
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About the Author
Larry Potter is a recognized authority on the subject of trading and has been publishing his newsletter, Stocks2Watch®, since January of 1998. Each evening, his newsletter contains picks for the next day and always includes a daily trading tip.
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