How Does a Stockbroker Pick the Best Stocks?


Quick Answer

There is no system or strategy for picking stocks that is always successful, according to Investopedia. Stockbrokers must choose their own favorite strategies and methods. Fundamental analysis allows stockbrokers to study stocks and any potential influences that may change stock values, and this method underlies typical stock selection strategies.

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How Does a Stockbroker Pick the Best Stocks?
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Full Answer

Stockbrokers must search for stocks that are likely to maximize profits and minimize losses, as Investopedia explains. The stock selection process involves a method known as fundamental analysis. Following this method, stockbrokers study companies carefully for potential influences that change stock prices, and they make investment decisions based on potential changes. Since increasing stock prices result in higher profits for the investor, stockbrokers are eager to choose stocks that offer strong returns. Choosing the best stocks and never losing money is unlikely because prices are influenced by more factors than stockbrokers can possibly analyze or predict.

Using reports available from the company, stockbrokers identify the impact of influences on key company metrics to predict future changes, explains Investopedia. A variety of factors, including company profitability and the value of a company's debt, influence changes in stock prices. Vendors, customers, governments and competitors may also influence stock prices with their actions and announcements.

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