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Investing in Stocks: 4 Simple Strategies for How to Pick Them

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Selecting a stock is not unlike shopping for most big purchases. You research the product, compare it to others for fit, quality, relative value and so on — perhaps compromising in some areas but not in others. Over time, you may become savvy enough to spot value or a prized possession easily.

You can approach stocks by looking to “buy what you know,” but you should also know what you’re buying from an investment standpoint. There are many lenses through which to view stocks, strategies to compare them and ways to hold them. Your goals as an investor can help determine how you analyze and hold stocks.

Here are some essential strategies to help you learn how to pick stocks.

1. Investment styles: Growth, income and value

For some investors, stock picking is all about finding stocks that fit a certain investment style.

Growth investors are looking for the next big thing, and are usually willing to pay a high price for a stock with future potential value. Companies in growth mode are reinvesting earnings and expanding quickly through hiring, new products, acquisitions and capital appreciation. Growth stocks tend to be more aggressive — as more investors drive up the price, it amplifies the risk that they won’t meet growth expectations for their valuation.

Income investors seek companies paying regular income to shareholders in the form of dividends. Even if you don’t need the income now, reinvested dividends function like regular returns that can help grow your investment. Income stocks tend to be found in older, more established firms, which may already be past peak growth years but are profitable and generally well run.

Value investors attempt to find underpriced bargains; that is, companies with underlying value not reflected in the share price. Specifically, they look for stocks with lower price-to-earnings ratios than the overall market, hoping the price will rebound. These are shares of companies that may no longer be in growth mode or may just have fallen out of favor. Value stocks are also more likely to pay dividends.

2. For long-term investors: Fundamental analysis

If you are looking for companies to invest in for an extended period of time, digging into the fundamentals can be a good way to understand its financial health and get to know the stock. Even if you’re not a business whiz, understanding these concepts and tracking them over time can help you compare the stocks of similar companies against one another.

Company fundamentalWhat it isWhat it tells you
Revenue How much money is coming into the company.If the company is growing. Increasing revenue year-over-year is generally a sign of growth, although it doesn’t necessarily mean increased profits.
Earnings per share (EPS)The company’s earnings divided by the total number of shares outstanding. How much of the company’s profits are returned to shareholders.
Price-to-earnings (P/E) ratioThe market value of the stock (or current price) divided by EPS. How much of a multiple investors are willing to pay for a share of the stock. A P/E ratio of 20 to 25 means investors will pay $20 to $25 for every $1 of earnings. High P/E can be a sign the stock will continue to grow or it may be overpriced. Low P/E may indicate a stock is undervalued.
Price/earnings to growth (PEG) ratioThe stock’s P/E ratio divided by expected 12-month growth. If the stock is fairly valued. While P/E ratio doesn’t account for a company’s growth, PEG does. A PEG of one is thought to be fairly valued, greater than one is expensive and less than one is undervalued.
Return on equity (ROE)Net income divided by average shareholder equity (which represents the company’s total assets minus liabilities). How efficient management is at passing earnings on to shareholders. ROE is expressed as a percentage. Investors may tend to stick to a percentage near the S&P 500, which was about 15.6% in 2017.

Many publicly traded companies file annual audited 10-K financials with the Securities and Exchange Commission (SEC), along with quarterly 10-Q updates. In these documents, investors can see a company’s revenue, debt, cash flow management and other metrics. Many financial websites and online brokerage platforms will provide fundamentals as part of their basic stock quote information, as well as access to analyst research and recommendations. Analyst reports often help add qualitative information to your research, such as competition, new products or brand equity.

3. For active investors: Technical analysis

Short-term investors and active traders making bets on what will happen shortly rely on something called technical analysis, which ignores the fundamental value of a stock and instead pays attention to moves in stock price or other types of trading data.

Technical analysis assumes that all information to be known about the stock is built into its price, and prices tend to follow certain repetitive patterns or trends due to investor psychology. These trends may come in the form of tides lasting a year or more, waves lasting one to three months or ripples lasting less than a month.

Investors chart a stock’s trading activity in different ways to uncover certain trend lines and that may be predictors of future moves:

  • Line charts track a stock’s closing price over longer periods, providing a broad view of the stock’s performance.
  • Bar charts give a sense of a stock’s daily movements, or opening price, high price, low price and closing price (OHLC). This view can provide a sense of a stock’s volatility.
  • Candlestick charts are similar to bar charts, with clear illustrations of the stock’s opening and closing prices. If the stock price closes higher than it opens, the difference or “wick” is positive.

A stock experiencing increasingly higher highs and higher lows over time is considered to be on an upward trend, and descending highs and lower lows would signal a downward trend. A sideways trend means that prices have been moving in the same general range. Looking at these charts, investors attempt to find levels of resistance, meaning points at which the stock may stop trending higher, or levels of support, meaning there’s strong enough demand to keep a stock from trending further downward.

Technical analysis can be complicated, which is why many active investors rely on tools offered by online brokers to help spot technical trends.

4. Broad stock picking: Diversified stock portfolios

An easy way to pick stocks is to buy many at once through an exchange-traded fund (ETF). These investments offer mutual fund-like diversification, but they trade like stocks. That means you can buy shares of the Standard & Poor’s 500 or NASDAQ 100 in the same way you might buy shares of Coca-Cola or Apple.

But ETFs come in many other shapes and sizes: You could use a handful of sector ETFs to build a full stock portfolio or balance stock holdings with a bond ETF. Interested in dabbling in commodities, currencies or hedge funds? There are ETFs covering alternative investments as well.

You can purchase ETFs through a broker, which means you might pay a transaction fee when you buy and sell them. Otherwise, ETFs tend to be very low-cost for investors who buy and hold.

Bottom line

Figuring out how to pick stocks seems to be as much about talent as skill, and even the most brilliant stock analysts can’t see around every corner. For the average person, investing in an ETF or mutual fund allows you to own stocks without having to select individual shares. You may not get the same shopper’s high, but there’s also less of a chance you’ll regret your purchase.

If you are determined to own individual stocks, it makes sense to start small and build slowly as your confidence in stock investing grows. You can even start with no money and a completely hypothetical portfolio. There are many stock market simulators online to help you experience stock trading without the risk. Either way, until you understand your appetite for volatility, individual stock investors should only risk excess or “fun money” you can afford to lose.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Melissa Phipps
Melissa Phipps |

Melissa Phipps is a writer at MagnifyMoney. You can email Melissa here

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Investing

J.P. Morgan You Invest Review 2019

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Chances are you’ve heard of J.P. Morgan Chase. It’s one of the major players in the financial space, and it’s long had a brokerage arm in addition to providing global banking services. Now, though, J.P. Morgan is getting into the online brokerage space with You Invest.

You Invest is an online trading platform that allows you to buy and sell individual stocks and exchange-traded funds (ETFs) without the need for a human broker. This review will look at what’s offered and provide you with the information you need to decide if it’s right for you.

You Invest offers a way for you to seamlessly connect your Chase bank account to your brokerage account. Additionally, you end up with access to plenty of educational materials and the ability to understand your total portfolio.

J.P. Morgan You Invest
Visit J.P. MorganSecuredon J.P. Morgan You Invest’s secure site
The bottom line: You Invest offers a fairly standard online brokerage experience with the perks of low-cost trading fees and a wealth of investor education.

  • Pay just $2.95 per trade after receiving 100 free trades.
  • Enjoy a large selection of investments, including stocks, bonds, mutual funds and ETFs.
  • Manage investments according to goals with the Portfolio Builder tool.

Who should consider You Invest

You Invest is ideal for beginning investors, especially those looking for education and assistance building a portfolio that will help them reach their goals. Intermediate and advanced investors also can benefit, but the educational tools and resources are especially helpful for novice investors.

Additionally, it connects to your other Chase accounts, making it easy for you to move money from your bank account to your brokerage account and vice versa. If you already bank with Chase, using You Invest to manage your portfolio might not be a bad choice.

While $2.95 per trade is a low cost, this product might not be the best choice for active traders. For traders who can keep their trade volume low, this can be an excellent brokerage since you receive 100 free trades in the first year after an account is opened — with the opportunity to qualify for more free trades in subsequent years.

J.P. Morgan You Invest fees and features

Current promotions

Up to 100 free trades

Stock trading fees
  • $2.95 per trade
  • $0 per trade for Chase Private Client, Chase Sapphire Banking, J.P. Morgan Private Bank and J.P. Morgan Securities clients
Amount minimum to open account
  • $0
Tradable securities
  • Stocks
  • ETFs
  • Mutual funds
  • Bonds
Account fees (annual, transfer, inactivity)
  • $0 annual fee
  • $75 full account transfer fee
  • $75 partial account transfer fee
  • $0 inactivity fee
Commission-free ETFs offered
Offers automated portfolio/robo-advisor
Account types
  • Individual taxable
  • Traditional IRA
  • Roth IRA
  • Joint taxable
  • Rollover IRA
  • Rollover Roth IRA
Ease of use
Mobile appiOS, Android
Customer supportPhone, Chat, 5,100 branch locations
Research resources
  • SEC filings
  • Mutual fund reports
  • Earnings press releases
  • Earnings call recordings

Strengths of You Invest

The educational tools and insights provided by You Invest are where this offering shines. They help you find the right mutual funds and stocks, and get you to understand your investing needs.

  • Low trading fees: To start, you get 100 free trades from You Invest. After you use your allotment, trades cost only $2.95. Among online brokers that charge trading fees, this is one of the lowest. If you’re not an active trader, you might be able to avoid paying fees fairly easily. You can get more free trades each year if you use certain Chase banking products, such as Premier Plus Checking.
  • Educational resources: You Invest offers a number of helpful articles about investing, strategy and more. It’s possible for you to learn the basics and then apply them to your portfolio.
  • Portfolio Builder: If you have at least $2,500 in your account, you can take advantage of this tool designed to help you choose the right investments for your portfolio. You’ll receive guidance on putting together a portfolio based on your answers to questions designed to gauge your risk tolerance, investment goals and time horizon.
  • Powerful screening tools: You can use these tools to set parameters and then find assets that fit your requirements. A list of options appears, and when you’re looking at Mutual funds , You Invest also includes Morningstar ratings and analysis of where they might fit into your portfolio.

Drawbacks of You Invest

A review of You Invest wouldn’t be complete without a look at some of the downsides. In many ways, You Invest is a typical online brokerage option. Other than some of the educational and portfolio building tools, there’s not a lot to distinguish this from other brokers.

  • No standalone app: Rather than offering a standalone app, you access You Invest through J.P. Morgan Mobile. Until you get used to it, it can be somewhat disconcerting to navigate to your trading app within the regular app.
  • Limited account types: There are only two account options with You Invest: taxable and IRA. You can get a Joint taxable account as well as an individual account, and there is a Roth option with the IRA. However, if you’re hoping for a custodial account or 529, you won’t find it with You Invest.
  • No managed portfolios: Right now, you won’t find managed portfolios, but they are supposed to be coming in 2019. So if you’re more of a hands-off investor, you might want to wait until there are more options available.
Fees
$2.95 per trade

Per Trade Stock Trading Fee

Account Minimum
$0
Promotion

Up to 100 free trades

Fees
$0.00 per trade

Per Trade Stock Trading Fee

Account Minimum
$0
Promotion

Get up to $600 when you open and fund an account within 60 calendar days of account opening, depending on deposited amount.

Fees
$0.00 per trade

Per Trade Stock Trading Fee

Account Minimum
$0
Promotion

Cash bonuses are available for new accounts. Bonuses start at $50 if you deposit or transfer $10,000+.

Is You Invest safe?

Any investment comes with the risk of loss. However, You Invest is insured by the SIPC for up to $500,000. Additionally, J.P. Morgan is a member of FINRA. As a result, you’re reasonably protected — especially when you consider that this is a company with more than $1 trillion in assets under management. It’s not likely to fail.

Just make sure you understand your own risk tolerance before you invest. While insurance protects you from failure, you’re not protected from market losses.

Final thoughts

You Invest can be a great option for middle-of-the-road investors who want a little more flexibility in their portfolios but still need some guidance. There are a number of assets to choose from, and the educational tools and resources allow you to build a portfolio based on your long-term goals and expectations.

Depending on your goals, there might be other products that work for you. For those more interested in a hands-off approach, Betterment might be a more suitable choice. You also can make trades for less with a service like Robinhood. However, you might not get the same level of educational tools with Robinhood, and Betterment won’t let you personalize your portfolio to the same degree.

If you want a low-cost, personalized way to invest — learning as you go — and if you’re already a Chase customer, opening a You Invest account might be a good way to move forward.

Open a J.P. Morgan You Invest accountSecured
on J.P. Morgan You Invest’s secure website

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Miranda Marquit
Miranda Marquit |

Miranda Marquit is a writer at MagnifyMoney. You can email Miranda here

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Investing

How to Make Money in Stocks

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Putting money in the market is well-worn financial advice for a reason: Investing in stocks is one of the best steps you can take toward building wealth.But how, exactly, is that wealth built? How is money earned by purchasing stock market holdings, and what can you do to maximize the gains you make from your own portfolio?

How to make money in stocks: 5 best practices

The way the stock market works — and works for you — is as simple as a high school economics class. It’s all about supply and demand, and the way those factors affect value.

Investors purchase market assets like stocks (shares of companies), which increase in value when the company does well. As the company in question makes financial progress, more investors want a piece of the action, and they’re willing to pay more for an individual share.

That means that the share you paid for has now increased in price, thanks to higher demand — which in turn means you can earn something when it comes time to sell it. (Of course, it’s also possible for stocks and other market holdings to decrease in value, which is why there’s no such thing as a risk-free investment.)

Along with the profit you can make by selling stocks, you can also earn shareholder dividends, or portions of the company’s earnings. Cash dividends are usually paid on a quarterly basis, but you might also earn dividends in the form of additional shares of stock.

Micro-mechanics of how stocks earn money aside, you likely won’t see serious growth without heeding some basic market principles and best practices. Here’s how to ensure your portfolio will do as much work for you as possible.

1. Take advantage of time

Although it’s possible to make money on the stock market in the short term, the real earning potential comes from the compound interest you earn on long-term holdings. As your assets increase in value, the total amount of money in your account grows, making room for even more capital gains. That’s how stock market earnings increase over time exponentially.

But in order to best take advantage of that exponential growth, you need to start building your portfolio as early as possible. Ideally, you’ll want to start investing as soon as you’re earning an income — perhaps by taking advantage of a company-sponsored 401(k) plan.

To see exactly how much time can affect your nest egg, let’s look at an example. Say you stashed $1,000 in your retirement account at age 20, with plans to hang up your working hat at age 70. Even if you put nothing else into the account, you’d have over $18,000 to look forward to after 50 years of growth, assuming a relatively modest 6% interest rate. But if you waited until you were 60 to make that initial deposit, you’d earn less than $800 through compound interest — which is why it’s so much harder to save for retirement if you don’t start early. Plus, all that extra cash comes at no additional effort on your part. It just requires time — so go ahead and get started!

2. Continue to invest regularly

Time is an important component of your overall portfolio growth. But even decades of compounding returns can only do so much if you don’t continue to save.

Let’s go back to our retirement example above. Only this time, instead of making a $1,000 deposit and forgetting about it, let’s say you contributed $1,000 a year — which comes out to less than $20 per week.

If you started making those annual contributions at age 20, you’d have saved about $325,000 by the time you celebrated your 70th birthday. Even if you waited until 60 to start saving, you’d wind up with about $15,000 — a far cry from the measly $1,800 you’d take out if you only made the initial deposit.

Making regular contributions doesn’t have to take much effort; you can easily automate the process through your 401(k) or brokerage account, depositing a set amount each week or pay period.

Fees
$0.00 per trade

Per Trade Stock Trading Fee

Account Minimum
$0
Promotion

500 free trades with a qualifying net deposit of $100,000

Fees
$0.00 per trade

Per Trade Stock Trading Fee

Account Minimum
$0
Promotion

Get up to $600 when you open and fund an account within 60 calendar days of account opening, depending on deposited amount.

Fees
$0.00 per trade

Per Trade Stock Trading Fee

Account Minimum
$500
Promotion
New accounts with a deposit of at least $5,000, may be eligible for a cash bonus, which can range from $100 to $2,500 depending on the amount deposited.

3. Set it and forget it — mostly

If you’re looking to see healthy returns on your stock market investments, just remember — you’re playing the long game.

For one thing, short-term trading lacks the tax benefits you can glean from holding onto your investments for longer. If you sell a stock before owning it for a full year, you’ll pay a higher tax rate than you would on long-term capital gains — that is, stocks you’ve held for more than a year.

While there are certain situations that do call for taking a look at your holdings, for the most part, even serious market dips reverse themselves in time. In fact, these bearish blips are regular, expected events, according to Malik S. Lee, CFP® and founder of Atlanta-based Felton & Peel Wealth Management.

So-called market corrections are healthy, he said. “It shows that the market is alive and well.” And even taking major recessions into account, the market’s performance has had an overall upward trend over the past hundred years.

4. Maintain a diverse portfolio

All investing carries risk; it’s possible for some of the companies you invest in to underperform or even fold entirely. But if you diversify your portfolio, you’ll be safeguarded against losing all of your assets when investments don’t go as planned.

By ensuring you’re invested in many different types of securities, you’ll be better prepared to weather stock market corrections. It’s unlikely that all industries and companies will suffer equally or succeed at the same level, so you can hedge your bets by buying some of everything.

5. Consider hiring professional help

Although the internet makes it relatively easy to create a well-researched DIY stock portfolio, if you’re still hesitant to put your money in the market, hiring an investment advisor can help. Even though the use of a professional can’t mitigate all risk of losses, you might feel more comfortable knowing you have an expert in your corner.

How the stock market can grow your wealth

Given the right combination of time, contribution regularity and a little bit of luck, the stock market has the potential to turn even a modest savings into an appreciable nest egg.

Ready to get started investing for yourself? Check out the following MagnifyMoney articles:

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Jamie Cattanach
Jamie Cattanach |

Jamie Cattanach is a writer at MagnifyMoney. You can email Jamie here