Choosing the right stocks is an important step in the journey towards financial goals. This decision not only affects the potential profit, but also the stability of the portfolio amidst market fluctuations.

Stock investment itself is an effective long-term strategy, but it requires a deep understanding of fundamental analysis, market trends, and global economic conditions.

Basically, with the right approach, stocks can be a powerful tool for building wealth sustainably.

Why is it Important to Choose the Right Stocks?

Stock investment basically offers attractive profit potential, but also has high risks. Therefore, choosing the right stock is the key to maximizing profits while minimizing losses.

If stock selection is done without careful consideration, the impact can be detrimental to the overall portfolio. Stocks that have poor performance can reduce the value of the investment and increase the risk of loss in the long term.

To avoid this, a planned strategy is needed in choosing stocks. This strategy includes fundamental analysis, understanding market conditions, and adjusting investments according to the financial goals and risk tolerance of each individual.

Through the right approach, we can manage the portfolio optimally and increase the chances of investment success.

Fundamental Analysis as a Basis

Fundamental analysis is an important approach to selecting stocks that focuses on a company’s financial performance, future prospects, and the intrinsic value of the stock.

This approach helps investors understand whether a stock is worth investing in based on its true value, not just its market price. Here are some important indicators in fundamental analysis.

1. Company Financial Reports

Observing revenue and profit trends is the first step that needs to be taken before buying stocks for long-term investment.

You can check the company’s income statement or financial statements to see the performance of stocks that are worth buying over the past year and the current year.

By analyzing this data, you can assess whether the development trend of the company chosen for investment shows potential as a stock that is suitable for the long term.

2. Return on Equity (ROE)

Return on Equity (ROE) is a ratio that measures the rate of return on investment from shareholders. ROE is one of the important indicators in fundamental analysis to determine stocks that are worthy of long-term investment.

For example, if a company makes a profit of Rp1,000, then the net profit generated must be at least 15% or more in a year.

If the company has an ROE below 15%, then it could be a sign that the company is not ideal as a long-term investment option.

3. Good Corporate Governance (GCG)

Good Corporate Governance (GCG) refers to a company that is managed by management with high integrity and reputation.

Before deciding to invest in long-term stocks, it is important to check the company’s track record, whether it has ever been involved in legal problems or other scandals.

If possible, choose a company that has implemented the principles of Good Corporate Governance and also make sure to understand the direction of their business development in the future.

Also Read: What Time Does the Stock Market Open? A Guide for Traders

Sector and Index Selection

Selecting stocks based on relevant sectors and indices can be an effective initial strategy for investors. This approach focuses on areas with high growth opportunities while maintaining portfolio stability.

1. Choosing Sectors with Bright Prospects

Choosing the right sector is an important step in determining the success of long-term investment. Sectors such as technology, health, and consumer, for example, show high growth potential in the future.

The technology sector, with advances in artificial intelligence, automation, and digitalization, continues to experience rapid development.

The health sector is also predicted to continue to grow, along with the increasing need for health services and innovation in biotechnology.

Meanwhile, the consumer sector, especially those related to everyday goods, remains stable even amid economic uncertainty.

2. Leading Stock Index

To keep investments safe with controlled risk, beginners are advised to start by investing in stocks listed in the LQ45 or IDX30 index.

This is because the stocks included in this index have a high level of liquidity and are generally supported by companies with strong fundamentals.

The list of LQ45 and IDX30 stocks can be easily accessed through the Indonesia Stock Exchange (IDX).

These stocks are also easier to predict their movements because their volatility tends to be low so that beginners will not have difficulty in making stock buying and selling transactions.

Practical Strategies for Choosing Stocks

Choosing the right stocks for investment requires a careful and planned approach. Here are some practical strategies that can help in choosing stocks that suit your investment goals.

1. Dollar Cost Averaging (DCA)

In addition to studying analysis, choosing stocks for long-term investment also requires the right strategy, one of which is dollar cost averaging (DCA).

Basically, dollar cost averaging is a routine investment method with a fixed amount carried out in a certain period, for example every month.

By using this strategy, you can still choose stocks that are suitable for long-term investment even though the price is increasing.

Conversely, when the stock price falls, you can also buy more stocks that have potential for the long term at a cheaper price.

2. Using a Stock Screener

A stock screener is a useful tool for filtering stocks based on certain criteria such as valuation or market capitalization. This tool makes it easier to find stocks that suit your investment goals.

You can use this screener tool to filter stocks based on certain criteria, such as valuation, growth potential, and financial stability.

3. Buying When Prices Drop

For beginners, buying the desired stock when the price is dropping is a highly recommended strategy. With this approach, a sense of security in investing can be achieved so that you can be calmer in making decisions.

In addition, there is the potential for greater profits, especially from Capital Gain, which will appear when the stock price rises again, providing a profitable price difference for investors.

 

Pay Attention to the Characteristics of Good Stocks

When choosing stocks, there are a number of factors that can be an indication that the stock is worth considering buying, including the following.

1. Rational Valuation

Stocks with a price that is comparable to their earnings (P/E ratio) are usually more attractive because they show that the stock price is not too high compared to the profit generated by the company.

2. Consistent Dividends

Companies that routinely provide dividends indicate that they have stable profits and care about the welfare of shareholders.

3. Stock Beta

Stock beta describes how much volatility a stock has compared to the market as a whole. Stocks with low beta tend to be more stable although their growth potential can be more limited.

Also Read: Stock Trading Tax: Case Examples and How to Calculate It

First Steps for Beginners

For those of you who are just starting to invest in stocks, there are several basic steps that need to be understood so that the investment process runs more smoothly and in a focused manner, including the following.

1. Understand the Basics of Stock Investment

For beginners who are just starting to enter the stock market, it is very important to have a basic understanding so as not to get caught in the wrong investment.

Although there is a lot to learn, understanding the world of stocks is actually not as difficult as imagined. The initial learning process may feel challenging, but over time, you will get used to it.

The first step is to learn the definition of stocks and other technical terms. This will make it easier for you to attend seminars or read books so that you can better understand the material presented.

Stocks themselves are proof of capital ownership in a company listed on the Indonesia Stock Exchange (IDX). There are two main ways investors profit from stocks:

Dividends, which are obtained from a portion of the company’s profits that are distributed to shareholders based on their portion of ownership.

Capital Gain, which comes from the difference in the selling price of shares which is higher than the purchase price.

With this basic knowledge, it is hoped that novice investors can be wiser in making stock investment decisions.

2. Determining Financial Goals

Setting financial goals is very important in stock investment. This goal will help you stay focused and directed. Before starting, first determine the time period that suits the goal.

In general, investment time periods are divided into three categories: short, medium, and long.

For example, if your goal is a pension fund, you should choose stocks from companies with strong fundamentals and a good track record in the long term.

With this approach, stocks can be the right choice to achieve long-term financial goals.

3. Choosing a Securities Company

To invest in stocks, you need to open a securities account at a securities company. This account is used to deposit funds to be invested. Each securities company has different transaction fees, both for buying and selling shares.

For beginners who have limited funds, choosing securities with low transaction fees is very wise.

Also Read: What is the Difference Between Mutual Funds and Stocks? Beginner’s Guide

 

Mistakes to Avoid

When investing in stocks, there are some common mistakes that beginners often make. Here are some mistakes to avoid when investing in stocks.

1. Buying Stocks Just Because They Are Popular or Trending

Joining an investment trend can be profitable, but just buying a stock because many people are talking about it without doing research can be risky.

2. Ignoring Fundamental Analysis and Choosing Based on Speculation

Investing based on speculation without understanding the financial condition and potential of the company can lead to losses.

3. Not Understanding the Risks Behind Cheap Stocks

Cheap stocks often look attractive, but they may have weak fundamentals. It is important to understand the risks involved before buying stocks at low prices.

Conclusion

Well, that was an interesting discussion about the Secret of How to See Good Stocks for the Long Term for Beginners that you can read in full at the Crypto Academy at INDODAX Academy.

In conclusion, in-depth analysis and a planned strategy are the keys to choosing the right stocks.

A strong understanding of the market and the factors that influence stock movements can provide maximum benefits for investors.

Therefore, it is very important for every prospective investor to start their investment journey with wise and considered steps.

For additional information, INDODAX will soon launch a new investment option in the form of stocks from the United States (US).

This latest feature allows you to not only expand your portfolio with crypto assets, but also access more than 50 US stocks, all through one integrated account on the INDODAX platform.

 

FAQ

1. What are the important indicators in choosing stocks for long-term investment?

Important indicators include analysis of the company’s financial statements (revenue and net profit), Return on Equity (ROE) of at least 15%, and Good Corporate Governance (GCG) to ensure that the company is well managed.

2. How to start investing in stocks for beginners?
Beginners can start by understanding the basics of stock investment, determining financial goals (short/long term), choosing a trusted securities company, and investing in LQ45 or IDX30 index stocks.

3. What is the Dollar Cost Averaging (DCA) strategy in stock investment?
DCA is an investment strategy by routinely buying stocks in a fixed amount, regardless of price fluctuations, to reduce risk and build a long-term portfolio.

4. When is the best time to buy stocks?
The best time is when the stock price of a quality company is being corrected or falling, as long as the company’s fundamentals remain strong and its prospects are good.

5. What are common mistakes to avoid when choosing stocks?
Mistakes to avoid include buying stocks just because they are popular, ignoring fundamental analysis, and choosing stocks with cheap valuations without considering their quality.