The common denominator for everyone who invests in stocks is to make predictions on the price evolution in order to capitalise on market movements and consequently make money. But how they go about it is dependent on how risk averse they are, and the time frame over which they want to realise profits.

Investing in the stock market is both an intellectual challenge and a reflection of your own character. Before you decide which stocks to pick you need to understand what kind of investor you are.


Growth investors tend to focus on a company’s potential for future profits, and whose earnings are rising the fastest. Since growth-oriented investors are interested in big future earnings, they are often willing to pay a high price for a stock relative to what it earns right now. The metric used to value stocks here is the price-to-earnings ratio (commonly referred to as the P/E).


Value investors hone in on the current value of a company’s assets (factoring in its debts), and look for stocks that are cheap compared to those assets. Optimistic forecasts for profits are less important for them so they end up buying stocks with lower P/E ratios.
Taking the value approach sounds like a more conservative approach, but there is the risk that these stocks go out of style for long periods of time.
What may have initially looked like a bargain may turn out to a bad investment which other investors avoided because they identified serious problems with the business.
That’s why solid research is critical when buying stocks, and the most common advice you’ll read about investing in stocks is to diversify.
Investing in stocks in a business sector about which you already have knowledge will usually result in better results than taking a punt on company based on a tip you’ve read about, but about which you know next to nothing.



The industrial sector is filled with companies whose names are familiar and whose products you may well own. They’re in construction, manufacturing, agriculture and transportation and include aerospace, defence and industrial machinery.
When picking a stock in this sector look for a company with a history of sustained profitability. If it has come through a recession and maintained profitability that’s a big plus.


Study the behaviour of the Board of Directors. If they’ve been able (and willing) to return excess capital to owners through dividends and share repurchases then they are worth considering.


Also, look out for companies with a competitive advantage, it usually means it’s harder for their competition to attack their market share.


For many the technology sector is a huge investment opportunity. It is the largest single segment of the market, eclipsing both the financial and industrial sector. But it is also the toughest to predict with any degree of long term certainty because it is the most highly competitive, where technological breakthroughs can render a product redundant and cause a stock to plummet.

For more detail : How to choose technology and industrial stocks