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How to Pick the Right Stocks for Superior Returns? No Easy Answers!

It’s not just all about 401ks and Roth IRAs when it comes to retiring.  Stock selection is an interesting aspect of retirement planning.

If you are just interested in maintaining a minimal amount of growth, then there are various established industries that can provide you with a small amount of consistent growth or return on your investment.  However, where is the fun in that?  At least part of the interest in trading stocks comes from the “lotto” aspect of the investment; maybe I can get lucky and strike it big with an undervalued or appreciate stock as it were.  While this is not exactly the best idea for long term consistency, if you have a little bit of spare cash, why not give it a shot, right?

Down, But Not Out.

Some investors like to pick stocks of companies or sectors that are experiencing a current downturn, or look like outright dogs.  One example of this is the tobacco industry following the rash of lawsuits during the late 90’s and early 2000’s.  Many people thought that this was going to be the end of the tobacco industry.  Unfortunately, people decided to keep smoking, and the industry rebounded.

The same thing happened during the late stage of the 2000’s with the auto industry.  The big three American auto manufacturers all experienced a complete beating, and, in the case of everyone but Ford, relied on government bailouts to maintain normal operations.  However, despite the fact that the stocks for these three stocks bottomed out in the short term, they eventually bounced back.

However, the inherent risk with this type of selection process is that, well, sometimes the company files for bankruptcy and you are left holding stocks worth less than the figurative paper upon which they are printed.

I Can See the Future

One of the more preferred methods of investing is by anticipating a future need or market trend and dumping all of your money into a business connected with fulfilling that need.  That sounds pretty simple right?  Well, ask all of the people that bought stock in companies that manufactured HD DVD or related accessories how stock speculation works out.  The same can be said for dozens of different technology based endeavors that ultimately failed.  Consumer are fickle, to say the least, and anticipating future trends is a tenuous science at best.

The best bet for this type of activity is to focus on something that is a basic human need, and not related to a hobby or entertainment related sector.  When it comes to healthcare, even semi-successful companies can make a great deal of money, or at least get purchased or picked-up by a larger corporation.

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