How to Tell if a Stock Will Do Well: A Simple Formula for New Traders

Starting to invest in stocks can feel like a big challenge. The market is full of confusing terms, and it’s easy to worry about making mistakes. But here’s the good news: you don’t need to be an expert to start. With a few easy steps, you can pick stocks that have a good chance of doing well. Let’s break it down.

1. Research: You’re Already a Stock Expert!

Believe it or not, you’re already doing stock research every day. How? By using products and services you love! Think about the phone you use, the apps you can’t live without, or the stores where you shop. Companies that make great products, like Apple, Amazon, or Microsoft, are often strong choices. Why? Because you know their products are high quality, and companies that make money from great products tend to stick around.

Tip: Make a list of products or services you love. Check if those companies are on the stock market. This is your first step to finding stocks worth investing in.

2. Follow Your Top Picks

Pick a few companies you like, even if you’re not sure you’ll invest in them yet. Just start paying attention to them! By following their news, you’ll learn what’s going on with the company. Look for updates about new products or services they’re working on. Are they innovating? Innovation is super important because it helps companies grow and make more money, which can make their stock more valuable.

Tip: Check news on sites like Yahoo Finance or Google News. Read about what new things the company is developing to see if they’re staying ahead.

3. Understand the Big Picture (Macro)

The best investors don’t just look at one company—they think about the bigger picture. This is called “macro,” and it’s about the forces that affect all stocks. One big force is liquidity, or how much money is flowing in the economy. When there’s more money around, people can buy more stocks, and prices often go up.

A simple way to track this is by checking the global M2 money supply, which measures money in the system. If M2 is growing, stock prices often rise about 12–14 weeks later. Think of liquidity like wind for a sailor. When it’s blowing strong, it pushes your boat (or investments) forward. When it’s weak, it’s harder to move.

Tip: Search online for “global M2 money supply” to see if it’s rising or falling. This can give you confidence that the “wind” is behind your investments.

Final Thoughts

Investing doesn’t have to be scary. Start with what you know—products you love. Then, follow those companies to see if they’re innovating. Finally, keep an eye on the big picture, like liquidity, to give yourself an edge. With these simple steps, you’re on your way to picking stocks that can do well!

Ready to start? Check out our next Free Workshop 

Disclaimer: The information provided is for general informational and educational purposes only and does not constitute financial, investment, legal, tax, or professional advice. It is not intended to be a recommendation to buy, sell, or hold any financial product, security, or investment, nor should it be relied upon as a basis for making financial or investment decisions. The content is not tailored to your personal financial situation, objectives, or risk tolerance. Before making any investment or financial decisions, you should consult with a qualified financial advisor, accountant, or other licensed professional in Ontario to obtain personalized advice suited to your circumstances. Any actions taken based on this information are at your own risk.

Investment Risks: All investments carry inherent risks, and past performance is not indicative of future results. Potential risks include, but are not limited to:

• Market Risk: The value of investments may fluctuate due to changes in market conditions, economic factors, or geopolitical events, potentially resulting in losses.
• Liquidity Risk: Some investments may be difficult to sell or convert to cash quickly without incurring significant losses.
• Credit Risk: The issuer of a security, such as a bond, may fail to meet its obligations, leading to financial losses.
• Interest Rate Risk: Changes in interest rates may affect the value of fixed-income investments, such as bonds.
• Currency Risk: Investments in foreign markets may be impacted by fluctuations in exchange rates, affecting returns in Canadian dollars.
• Inflation Risk: The purchasing power of investment returns may be eroded over time due to inflation.
• Concentration Risk: Investing heavily in a single asset, sector, or region increases the potential for significant losses if that investment underperforms.
• Regulatory and Tax Risk: Changes in laws, regulations, or tax policies in Ontario or Canada may adversely affect investment returns or strategies.
• Fraud and Operational Risk: Investments may be subject to risks from mismanagement, fraud, or operational failures by investment providers or intermediaries.
• Volatility Risk: Certain investments, such as equities or cryptocurrencies, may experience significant price volatility, leading to potential losses.
• Loss of Capital: There is a risk of losing some or all of the invested capital, particularly in high-risk investments such as stocks, derivatives, or alternative assets.

Investing involves the potential for both gains and losses, and no investment is guaranteed to be profitable or safe. You are responsible for conducting your own due diligence and understanding the risks associated with any investment. The author, publisher, or provider of this information is not liable for any losses, damages, or financial consequences arising from your use of or reliance on this information.