In a gadget shop, you see lots of innovative products and designs that endear you. Despite their beauty and usefulness some of the products quickly become obsolete as newer, cheaper and more innovative substitutes become available.
However, some products remain very relevant and hardly get replaced over time either because the technology is not easily modified or its users just have no reason to replace it.
This bears a remarkable similarity to the stock market too, as some stocks can continue to increase value and stay relevant over the years whilst some flatter to deceive and only to be swept aside by competition.
Choosing the right stock with long-term growth potential is no easy pick and certainly not one you want to be investing in for the long term if you are not financially savvy, disciplined and knowledgeable about the industry.
Searching for the right stock with a good value and prospect for growth is no easy meat. Like a gadget that stands the test of time, you must give your investments the care and attention it requires and also follow trends and happenings within the industry. With time you will know whether the stock gets easily affected by trends and thus soon becomes obsolete or whether it will remain strong over time.
There are also loads of forums out there where people share ideas about the stock market and recommend stock picks. Whilst they are quite good (I participate in some of them too) you must know exactly why you use them.
For example, I engage in those forums for one major reason.
They are a very rich source of information which is very crucial to mitigating some of the risks arising from the asymmetry of knowledge. Aside from this, I see no use for it beyond quick profits and besides some of those profits quickly turn into losses over time. Forums can carry as a by-product a Heard Mentality effect which more often than not is not good for sound investing.
We have all been there and done that and have enjoyed and suffered from the boom and bust that was the stock market. Let’s not repeat the same mistakes.
Editor’s Note: This article was first published in 2013 and has now been updated and republished for your information.