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