Up to now, there have been thousands of A-shares in China's Shanghai and Shenzhen stock markets. After ten years of ups and downs, investors have become increasingly mature. From the early days of general rise and fall in individual stocks to now, they have completely bid farewell to the era of simultaneous rise and fall. Based on two years of market analysis, the proportion of individual stocks that have risen during each uptrend is only about half, and stocks that have surpassed the overall trend are even rarer. Even if many people judge the trend correctly, they still cannot make profits due to stock selection deviations, indicating the importance of stock selection for investors.

Basic Strategy for Stock Selection in Section 1

How to choose stocks correctly? Over the past 100 years, people have created various methods that are overwhelming, but no matter how many changes there are, they can be summarized into several basic investment strategies.

1、 Value discovery:

It is the most traditional investment method on Wall Street and has been recognized by Chinese investors in recent years. The basic idea of the value discovery method is to use basic indicators such as price to earnings ratio and price to book ratio to discover undervalued stocks. This method poses certain difficulties for non professional investors due to the requirement for analysts to have considerable professional knowledge. The theoretical basis of this method is that prices always return to value.

2、 Choose high growth stocks:

This method has become increasingly popular both domestically and internationally in recent years. It focuses on the high growth of the company's future profits, while traditional value judgment criteria such as price to earnings ratios are less important. Adopting this value orientation for stock selection, people are most attracted to high-tech stocks.

3、 Technical analysis and stock selection:

Technical analysis is based on the following three assumptions: (1) market behavior encompasses all information; (2) Price changes along the trend; (3) History will repeat itself. Under the above assumptions, when using technical analysis methods for stock selection, it is generally not necessary to pay too much attention to the fundamental situation of the company's operations, financial status, etc. Instead, technical analysis theory or technical analysis indicators are used to select stocks through analysis of charts and graphs. The basis of this method is the price volatility of stocks, which means that regardless of their value, stock prices always have periodic fluctuations. Technical analysis of stock selection is to find oversold stocks and capture profit opportunities.

4、 Investment portfolio based on market indices (index funds):

With the increase in the number of stock companies, many people have found that it may be possible to accurately judge the overall trend, but it is too difficult to choose the right stocks. It is becoming increasingly difficult to obtain returns that exceed the average, often requiring a lot of manpower and material resources. The results obtained are similar to or even worse than the overall market. Instead of doing so, it is better not to conduct any analysis and stock selection, but to completely refer to the composition of the index to make an investment portfolio, which can at least achieve investment returns synchronized with the overall market. If there is an index fund that is consistent with the overall market, investors do not need to choose stocks, they only need to buy the fund when they are bullish on the stock market and sell it when they are bearish on the stock market. Due to the absence of index funds in our country, investors are unable to invest according to this strategy, but the ideas behind this method can serve as a reference.

The above strategy is mainly based on two fundamental analysis methods for securities investment, namely fundamental analysis and technical analysis. From the above basic stock selection strategies, various stock selection methods can be derived. In addition, with different market trends and hotspots, there will also be different stock selection strategies and methods at different stages of stock market development. In addition, different people will also create their own unique stock selection methods and techniques.