How to Pick a Winning Stock: A Step-by-Step Guide

Making money in the stock market is a dream for many people. But, it can be difficult to know where to start

Zoe Burt
January 26, 2023
Choosing stocks that have the potential to make you money the key to unlocking investing's full potential (Image: Female Invest)
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No one enters the stock market to lose money, which is why choosing the right stocks to weave into your investment portfolio is the key to financial success. So where do you start?

In this guide, we’ll walk you through the process of choosing stocks that have the potential to make you money. We'll provide tips on how to analyse stocks, and give you some resources that will help you get started. So, whether you're a beginner or an experienced investor, read on for some helpful advice on how to pick stocks.

Picking stocks for the first time

The stock market can be intimidating. After all, the stock market is a complex system that can be hard to understand. But, by following some simple steps and gaining an understanding of how stocks work, you can increase your chances of picking winning stocks. 

Remember, picking stocks isn't a surefire way to make money. It requires patience, research and knowledge building. But, if you put in the work, it can be an exciting way to build your wealth over time.  So, let's get started on the path to picking stocks that could make you money! 

1. Know your goals

When picking a stock, it’s crucial to be crystal clear on your investment goals. What are you saving for, and how much time do you have to get there? Are you saving for retirement, or are you saving for a big purchase that requires the money in 12 months time? Understanding your goals is important because it should help set investment foundations like how much to invest and what to invest in.

A carefully considered approach is key to reaching your financial goals (Image: Female Invest)

2. Don't just look at price

When choosing stocks, it's easy to get caught up in the price. After all, stocks with lower prices may seem more affordable. However, don't let yourself be fooled by a low price tag – make sure you do your research before investing any money. Consider factors such as past performance, the company's fundamentals, and the potential for future growth.

3. Research, Research, Research

Do your due diligence before investing in stocks. Read up on the company you're interested in and get to know their business model and financials. Check out analyst reports and look at the stocks they recommend. You can also use tools like stock scanners to find stocks with specific criteria.

4. Don’t follow the herd

It can be tempting to invest in stocks that everyone else is buying. But remember, just because something is popular doesn't mean it will be profitable for you. Analyse stocks on their own merits and don’t just follow the crowd.

Just because something's popular, doesn't mean it's profitable for you.


No matter how confident you are in stocks, it’s important to diversify your portfolio. Don't put all of your eggs into one basket – instead, spread out your investments across different stocks and sectors. That way, if one stock takes a dive, the others can help balance the losses.

6. Stay up-to-date

Keep up with the news related to stocks you’re interested in. Staying informed can help you make better investment decisions and give you an edge when it comes to picking stocks.

7. Follow the trends

Take note of what stocks are trending, and consider investing in stocks with potential for future growth. Pay attention to sector-wide trends and stay up-to-date on industry developments.

8. Check the company’s value

The P/E value is a metric used to evaluate whether the stock price is attractive compared to other companies in its industry. In other words, investors use the P/E value to look at a company's market value and to decide if they should invest or not. 

The P/E ratio is calculated by: Price per share / Company’s earnings per share. But, don’t worry. The actual number will always be stated on your trading platform, so you will never have to do the calculation yourself and you certainly don’t need to be a math whiz to be an excellent investor.

Never make brash decisions when it comes to investing. Take your time to figure out the right stocks for you and your financial goals (Photo: Daniel Monteiro/Unsplash)

9. Keep emotions out of it

When it comes to picking stocks, don't let emotions get the best of you. Investing with your heart instead of your head can be a recipe for disaster. So, take a deep breath and make decisions based on facts and data rather than emotion.

10. Stick to the plan

Finally, it's essential to stick with your investment plan. Don't make rash decisions, and don't get too caught up in the stocks you picked. Even if stocks start to drop, remember that stocks are cyclical and there could be a chance for them to rebound. Stick with your research-backed stocks. don’t be tempted to jump ship and chase stocks that are on the rise.

The bottom line

Choosing stocks can be a daunting task, but hopefully these tips have given you some insight into the process. With research and the right foundations in place, picking stocks for the first time can be an exciting and rewarding experience. Just remember to do your research and stay informed about stocks you’re interested in. With a little knowledge and some patience, you can become a winning stock picker in no time. So without further ado, it’s time to get out there and start picking stocks!