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26/04/2018 16:05

How to Select Stocks

Selecting stocks is a lot of science, certain amount of experience and a bit of luck. At, we advocate a two-step approach methodology, similar technique used by most fund managers, stock market analysts and experts today. In fact, Mr. Warren Buffet utilizes a similar approach:

1. Understanding global and American macro economy analysis to identify a specific direction.

This analysis enables us to understand how major forces and sectors are affecting the performance of the economy. Macro indicators such as GDP (gross domestic product), CPI (consumer price index), PPI (producer price indices), unemployment rate, interest rates, inflation rate, and balance of trade must be carefully analyzed so that we can forecast the next engine of growth domestically and globally. Should the focus be on IT, Consumer Products, Bio-technology, Pharmaceutical, and Banking? Should sectors such as Infrastructure, Energy & Natural Resources be avoided?

2. Research on the stocks.

After identifying the general sector to invest, the focus will be on the type of company that best represents the potential of the chosen industry/sector. A few criteria that have been commonly used include:

  • Annual Reports & Financial Statements
  • Earning growth
  • Recent earnings surprises
  • Price/earnings ratio
  • Debt/equity ratio
  • Dividend track record
  • Market capitalization & size
  • Industry relative strength
  • Management Discussion & Management Team Analysis
  • Short, Medium to Long Term Corporate Objectives
  • Sharia-compliant status
  • Competitors competitive analysis

The same principals actually apply whether you are investing in U.S. Stock market or your own domestic market. If you are investing in European market, you 1st need to identify the next engine of growth in Europe and then find the best corporation that will represent that particular industry in Europe.

There is no guarantee that everyone can identify the next engine of growth or the best company that can represent that potential. What is true today may not be tomorrow due to social, economy and political changes. Management and mission of a corporation may change over time. Good investment today may not be so rosy tomorrow and vice versa.

Any successful investor needs to constantly keep himself/herself updated on financial information all the time. Otherwise, he/she may buy or keep the wrong portfolio of stocks.

It is a matter of fact that not too many investors know how to read a Financial Statement. Not everyone knows the relevant information in a Financial Statement that will dictate the movement of the share price in the market in the upcoming weeks and months. Even less people know how to compare Financial Statements from year to year to determine the trend. hopes to educate our members so that they can be better informed and presented with a more neutral perspective of each possibility. On the long run, this will be proven beneficial because scientific analysis coupled with experience gained over time, will supersede luck and chances.

Many FSPs claim to have found the ideal investment solution for their clients and answer to their problems. At, we do not believe in the BEST investment. It is our view that the path to long-term financial success is depends on a clear understanding & knowledge of the client himself/herself.

Hence, we see financial education of our members as our lifetime mission.

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