Picking stocks feels overwhelming until you have a checklist. Here’s a simple framework beginners can actually follow.
1. Understand the business
If you can’t explain in a sentence how the company makes money, don’t buy it yet.
2. Check financial health
Look for growing revenue and profits, manageable debt, and consistent performance over several years.
3. Consider valuation
A great company at a terrible price is a poor investment. Compare basic ratios against peers.
4. Read the trend
You don’t have to buy at the exact bottom, but avoid fighting a strong downtrend.
5. Define your risk
Before buying, know your position size and where your stop-loss goes.
Key idea: You will be wrong often — even the pros are. That’s why risk management, not perfect picks, keeps you profitable.
Key takeaways
- Only buy businesses you understand.
- Favour growing revenue, profit and low debt.
- Price matters — don’t overpay.
- Define size and stop before you buy.
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