Should I factor in market caps or returns more heavily when deciding what companies to invest in? 

I'm new to purchasing stocks. Should I factor in market caps or returns more heavily when deciding what companies to invest in? 

Investing, Stocks
Answers
Sort By:
Most Helpful
January 2018

Madison, John

Ashland, VA
75% of people found this answer helpful

If you're new to investing, I'd recommend focusing on building a diversified, low-cost mutual fund (or ETF) portfolio. Picking stocks is incredibly difficult to do consistently. Index funds outperform the vast majority of professional, active managers. Any hope that you or I could do better is probably unrealistic.

Instead of picking individual stocks, follow a few simple investing fundamentals like:

  1. Get yourself ready to invest by first paying off consumer debt and building an emergency fund
  2. Stay tax efficient
  3. Understand your personal risk tolerance
  4. Keep costs low. The lower the fees, the more of your portfolio you get to keep!
  5. Rebalance periodically
  6. Stay the course! Don't bail out of the market when prices drop!

History shows us that regular investments, diversified across the equity markets and rebalanced periodically outperform other more "professional" investing strategies.

Get started today! And good luck!

January 2018
January 2018
February 2018