Circle of Competence
This is where you leverage your professional skills to identify stock ideas. This is a highly recommended technique for a newbie investor. This method requires you to identify stocks within your professional domain. For example, if you are a medical professional your circle of competence would be the healthcare industry. You will probably be a better person to understand that industry than a stock broker or an equity research analyst. All you need to do is identify which are the listed companies in this space and pick the best based on your assessment. Likewise if you are banker, you will probably know more about banks than the others do. So, leverage your circle of competence to pick your investments.
The point is that the trigger for investigating stocks may come from any source. In fact, as and when you feel a particular stock looks interesting, just add it to your list. This list over time will be your ‘watch list’. A very important thing to note here is that a stock may not satisfy the checklist items at a particular time, however as the time progresses, as business dynamics change at some point it may match up to the checklist. Hence, it is important to evaluate the stocks in your watch list from time to time.
-zerodha
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