People often follow the news or stock picks by analysts and choose stocks based on this information. If you are going to invest in individual stocks rather than mutual funds, you really need to know what you are investing in.
The best way to pick stocks is to invest in what you know and understand. If you do not understand what a company is doing, like a new technology that they are heavily investing in, then steer clear.
If you work in a certain sector like the food industry, then you should understand who the big players are and who has the best business strategy. You should invest in those companies. You should be able to spot the red flags in industries that you are familiar with much faster than you would in a stock that you picked based on a newspaper article.
Therefore, always know the company or at least what they do, listen to the news to get extra information, and pick wisely.
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