Getting Started in Stocks

Knowing which stocks to invest in is an understandable stumbling block for so many people. They want to put their money in stocks, but they don't want to make mistakes that will cost them money.

Fortunately, it doesn't have to be complicated. Let's take a look at how you find companies that are worthy prospects for your money.

In fact, let's start with some advice from the pros. Here's some encouragement from none other than Ken's old classmate at Boston College, Peter Lynch, the legendary Fidelity Magellan mutual fund manager. One of Peter's rules in his book One Up on Wall Street: How to Use What You Already Know to Make Money in the Market (Simon & Schuster, 2000) is "Stop listening to professionals!"

"Twenty years in this business," Peter wrote, "convinces me that any normal person using the customary three percent of the brain can pick stocks just as well as, if not better than, the average Wall Street expert."

See? Even one of the most respected investors of our times thinks you can do it!

He ought to know. When it comes to picking stocks, Peter has found many "ten baggers" (stocks that appreciate tenfold or more) just by keeping his eyes, ears and mouth open. For example:

• During a business trip to California, he got a great burrito at Taco Bell. Someone at the Holiday Inn told him about the L.A. burrito chain.
• His kids at home had an Apple Computer, and the systems manager at Fidelity had just purchased a number of Apple computers.
• Peter loves the coffee at Dunkin' Donuts.
• Peter's simple philosophy of looking for investment opportunities right under one's nose helped make Fidelity Magellan one of the most successful mutual funds in history.

We believe in looking for companies with unique new products or superior services. Go for the player that has more market share than any others in the field, or with little true competition. When stiff competition begins to emerge, it might be time for you to pull out of that stock while it's still ahead. And beware when some new company starts touting "revolutionary" technology.