May 11, 2012. Samuel Valero
Let me give you a framework for some good stocks to invest in depending on your goals. Small cap stocks are good for growth. They tend to beat the market over time on average. The best way to play this is to invest in small cap funds that track an index like the Russell 2000.
That is because you don’t want to be in the business of picking out individual stocks for this. They are volatile and very risky. You may not choose the right ones and end up not beating the market. Historically, if you want to drill down further, small cap value stocks have performed the best. Large cap stocks are good for income investments.
That is because these companies tend to give dividends. You have to watch out for the tax implications, but if you can handle it, these can be good for conservative investors. They tend to be less volatile and they give you an income without having to liquidate your investment capital. It can feel good to have an asset working for you to generate cash like this.
If you are in a particular field or industry, you may want to look at good stocks for your sector. That is because you are more likely to understand the business of these stocks and invest accordingly. I’m not talking about insider trading of course. But if you work in a particular field, you can take the pubically available information and have an edge in terms of translating that into analyzing stocks in the industry.
Published May 11, 2012. Samuel Valero