Why I Research Stock Ideas

research stock ideas

Why do you research stock ideas?

Here’s the short story of how I came to regularly research stock ideas… (for better or worse)…

It all started in my 4th year of undergrad studies. I was more than 75% finished my biochemistry degree… and then… all of a sudden… I took a commerce class.

And everything changed.

Understand: My high school didn’t have much of a business program. And most people I knew leveraged their scientific expertise to reach success. So that’s the path I primarily followed…

And despite being interested in investments, buying index funds and generally accumulating business savvy, it was not until September 2008 that I really came face to face with the joy of commerce classes. It hit me like a brick…

Business people study investments for a living! I couldn’t believe it. And here I was thinking all that mattered was the kinase family of enzymes. Damn…

Now between you and me, I’m not sure if you ever took science at the academic college level. But here’s everything you need to know: “that shit is pretty dry.”

I mean sure…

I learned a lot about the value of biochemical reactions (read: processes) and I developed some powerful critical analysis skills. So for this, I am thankful. But otherwise: My science degree was a snore.

And in stark contrast:

Commerce was like that Christmas when you got your first GT Snow Racer from Santa. You know what I mean? Don’t worry. The point is…

Once I started researching stock ideas for the “Investopedia stock market simulation game” in my introductory commerce class, I never looked back.

How could I?

They were giving out university credits for stock idea research! I was thrilled, but disappointed that it took me this long to stumble upon this gold mine of knowledge (that appeared far too useful to be classified as Academic).

But it wasn’t all sunshine and lollipops. Let me tell you…

“Timing Matter When You Research Stock Ideas”

As I said, it was September 2008 when I really started getting acquainted with financial markets. You don’t need to be a stock market historian to know that things were about to get very bearish.

By march 2009 I had lost 40% of my balance (and only reason I didn’t lose more was because I hadn’t had time to research stock ideas and buy them). Regardless of my newbie-performance, I was amazed by the destruction and (re)creation of wealth. And the stock market has mesmerized me ever since.

And remember, back then, Stocktwits had just been launched. And traders were incredibly genuine and open on Twitter, (they were still exploring the platform to understand how they could use it to trade and research stock ideas). It was an exciting time, and these tools continue to shape the investment advice landscape to this day.

But since the early days, my research of stock ideas has improved methodically, and drastically.

Here’s how you can do the same…

Improve How You Research Stock Ideas:

At first, I used to just follow along with blogs and newspaper articles. I would read the Globe Investor and the archives of flyonwallstreet.com to try and figure out how successful traders research stock ideas.

But for the most part I was piggybacking on stock picks I didn’t understand. It’s hard to have conviction when you don’t know why your buying. So I knew I had to improve my research and analysis…

Here’s what I did next:

I read books, blogs and newspapers voraciously. I tried to distill the timeless wisdom from the hyperbole. I desperately wanted to find out what really matters in stock picking. I wasn’t sure where to start, so I dove into technical analysis

Charting looked relatively intuitive and people said their kid sisters could do it. What better place to start improving your stock idea research then, right?

Now let me just say: By no means am I a master of technical analysis. But I definitely respect price action. And I understand the importance of historical prices and their relation to future support and resistance levels.

After spending a year or two drawing more and more lines on my charts, I discovered how free online stock screeners could save time and highlight attractive investment ideas. My research methodology for identifying investments accelerated.

Eventually, my knowledge about researching stock ideas started to snowball. I realized I could screen for fundamental valuation criteria, without having to comb through financial statements (the main reason I had avoided fundamental analysis in the first place). I also subscribed to a few premium stock research services to help speed up my search for high probability stock ideas.

At some point, I became turned on to the concept of “margin of safety.” I read as much Graham and Dodd as I could, taking notes along the way. This has become the foundation for all of my investment decision making. Their valuation metrics and concepts point me towards securities worth analyzing further.

When I couple this disciplined investing methodology with my nascent understanding of technical analysis, I started to see some wins. Then a couple more. Not every trade has been a success (obviously). But I’m increasingly confident in my blended approach to managing my stock portfolio.

I’m always getting more disciplined about waiting for prices to come to me. And learning how to define buy and sell targets before entering a stock has helped increase my conviction as a stock trader. It’s one of the smartest changes I’ve made.

Of course (as you know), stock idea research is something that you need to keep up with. Your old ideas won’t usually make you money today. And you can always improve your stock picking methodology.

So that’s the story of how I got into researching my own stock ideas.

To this day I still enjoy the process (kind of like a puzzle). And it helps me feel educated about allocating the capital I’ve earned. Make sense? And hey…

Why Do You Research Stock Ideas?

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