It's easy for an investor to fall for a good story. Strong headlines, new technologies, burgeoning industries -- these can easily lead to great stock ideas. But they can also lead to big losers. So how can an individual investor buy into the good ones and dodge the losers? That's where "due diligence" comes in. Study the company, read SEC filings, learn about management -- it's not rocket science, but it can be daunting and it can take some time.
One common shortcut is to see what the "smart people" are saying. Just be sure that the smart people you look to have your best interests in mind. Talking heads on TV are not working for you. Brokers usually make money on frequent trades, which is not in your interest. Even financial advisors often have the wrong incentives in place, and can easily steer you wrong. If you're trusting someone else to vet your ideas, you want to make sure that they work only for you, and that their compensation is aligned with your success.
If that's the case, it can help to begin by seeing what they have to say. Then it's on you to follow up and make your own decisions.
Everyone knows Amazon.com is the king of the retail world right now, but at its sky-high valuation, most investors are worried it's the company's share price that will get knocked down instead of competitors'. The Motley Fool's premium report will tell you what's driving the company's growth, and fill you in on reasons to buy and reasons to sell Amazon. The report also has you covered with a full year of free analyst updates to keep you informed as the company's story changes, so click here now to read more.