Follow these 5 basic rules for picking stocks

With so many choices in a rising market, selecting the best stocks can be challenging for many investors. While every investor will have their own goals and investment style, having a clear set of basic rules can help. The following are five simple rules that you should consider, at least for your core holdings.


Invest in mature companies that have easy-to-understand, straightforward and successful business models. Favour high Relative Safety (RS) stocks that have rising earnings and rising prices. If you have personal knowledge of a company that meets the above criteria that you believe is a great business in a leading industry, this is a stock that should be in your long-term portfolio or WatchList of potential buys.


Invest in companies that are “best of breed”. These are the sector and industry leaders that have well-established or extremely strong emerging brands. Alimentation Couche Tard, Gildan Activewear, Royal Bank, and Shopify are Canadian examples. Apple, McDonalds, Netflix and Starbucks fit the bill in the US.


Ignore the old investing axiom, “past results do not guarantee future performance”. It may be true, but it’s also misleading. Ask yourself, would you rather invest in a business that struggles to achieve consistent price appreciation, or one that has made money for shareholders year in, year out for several years? Think of the wealth companies like Apple, Microsoft and Netflix have created for their long-term shareholders. Closer to home, study the stocks in the Master Retirement WatchList. Over the last year, the average gain of the 23 stocks in the list on April 23 is greater than 43% with no losers. The 5-year and 10-year WatchList Average Graphs and several of the individual stock graphs show the gains are mostly smooth and steady, bottom left to top right. Wouldn’t you rather invest in stocks like these for your retirement?

VectorVest chart of AAPL

Click or tap image to enlarge.


Favour companies that pay dividends, especially companies that have a track record of increasing their dividend each year. Mature, dependable companies that can afford to share profits with their investors in the form of dividends is a sign of quality. Consider companies that have high Dividend Safety (DS and a Dividend Growth (DG) well above the rate of inflation. If you can hold strong dividend payers for several years, you will benefit from the magic of dividend compounding.


Buy new positions or add to positions only when your stock and the market is rising. VectorVest’s Color Guard gives clear guidance of when it’s okay to buy stocks; when it’s okay to buy with caution; and when it’s not okay to buy. The Market Timing Graph identifies the long-term trend and has established benchmarks for when the market is near a bottom for potentially explosive gains and near a top when it’s best play good defense.

You’re sure to improve your long-term investing success when you learn to FOLLOW THESE FIVE BASIC RULES FOR PICKING STOCKS.


Our next meeting is Saturday, May 11 at 11:00 am Eastern. Our keynote presentations are titled, Identify Swing Trading Targets, presented by DR. BARBARA STAR; and, Tips and Ideas From Dr. DiLiddo’s 7 Secrets to Making Money With VectorVest, presented by STAN HELLER. To register, go to; click on Live Events/Webcasts.