What are your stock picks for 2020

Which stocks will buy in 2021? Stock picking tips

Which stocks to buy? If you want to be successful with stock picking, you need clear evaluation criteria for your stock selection and a good strategy.

You have probably heard the names Warren Buffett or George Soros before. The two are among the most successful investors in the world and have become extremely wealthy with skillful stock picking. That means: With your stock selection, you have consistently achieved a better return than the market as a whole. Many investors try to emulate their role models and pick out the stocks that are currently cheap and that have great potential for the future at the same time. What sounds so simple, however, only a few investors succeed in practice. Because stock picking is time-consuming and complex, requires intensive analyzes, a sophisticated strategy and a lot of perseverance. "Which stocks to buy" - that is the crucial question.

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What is stock picking?

When it comes to stock picking, it is assumed that individual market participants can be smarter than the general public. If you follow this, an investor can achieve a higher return than the overall market by purposefully buying individual stocks.

Stock picking is in contrast to the hypothesis of efficient markets. The US economist Eugene Fama received the Nobel Prize in 2013 for this hypothesis. Fama assumes that financial markets are efficient and that all available information is immediately reflected in prices. In this way, no market participant can gain an advantage over others through financial analysis or insider knowledge. It is therefore not possible to be better than the market in the long term, i.e. to achieve long-term above-average profit with equity investments. This thesis is also behind the investment strategy of listed index funds (exchange-traded funds, or ETFs for short), for example. ETFs invest widely in order to participate in the overall development of the market. They develop like the underlying index on which they are aligned - not better, but not worse either.

Now the experts argue about whether Fama is right or not. One thing is clear: successful stock picking is not easy.

Stock market legends such as investor Warren Buffett and fund manager Peter Lynch show that it can still work. You have consistently outperformed the broad equity market with stock picking. They particularly like to buy undervalued stocks in order to stay invested for as long as possible and make big gains.

What should you watch out for when choosing stocks?

Basis for stock picking: The investor needs to know what he is investing in. In order to be able to answer the question “which stocks to buy”, you must first analyze companies and markets. There are also different approaches here. One possible is the fundamental analysis, in which quantitative factors such as business structure, earnings position and cost situation as well as qualitative factors such as know-how, innovative ability, quality of management and future potential are included.

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There are various evaluation criteria for the analysis, which affect both the company itself and the market environment. This can be, for example: the stock market value, the return on equity, the profit development, the business model or the growth potential, as well as the competitive environment, the market position, political framework conditions and social trends.

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What strategies are there for stock picking?

If you want to be successful with stock picking, you need clear evaluation criteria as a basis for your selection as well as a strategy that you consistently follow. The now deceased stock exchange millionaire Beate Sander, for example, has developed her own up / down courage strategy.

There are essentially three stock picking strategies:

  • Value investing:
    This is the strategy of Warren Buffett, who sees stocks not as a short-term object of speculation, but as shares in a company in whose capital and growth he wants to participate in the long term. Value investors like Buffett focus on undervalued companies and the qualities they contain. You are betting on getting a low price when you buy it and on participating in price increases in the shares over the long term. Fundamental key figures for stock picking in value investing are, for example, the price-to-book ratio (P / E) or the price-earnings ratio (P / E). With the KBV, the price of a share is set in relation to its pro rata book value, that is, the shareholders' equity per share. With the P / E ratio, the price is set in relation to earnings in a certain period of time or to expected earnings per share.
  • Growth Investing:
    With this strategy, the investor looks for companies that have particularly high growth potential, i.e. that have significantly higher growth rates than the market or the industry in which they are located. Often these are young companies with new business models that do not even generate a profit, but invest all their capital in their growth. Here, investors are primarily relying on the increase in value. An important indicator for stocks with a future is the price-earnings-to-growth ratio (PEG). It is calculated from the price-earnings ratio (P / E) of a share divided by the expected company profit in the coming years. Investors also look at earnings per share (EPS).
  • Dividend strategy:
    This stock-picking strategy relies on stocks of companies that pay particularly high dividends. The main criterion here is the dividend yield.

Which basic rules are important for stock picking?

There are many strategies for stock picking when it comes to stock picking. However, some basic rules apply to all investors who are toying with the purchase of individual stocks:

  • An investor must be aware that he can lose his money on the stock market. The technical term is: total loss. Large companies can also fail - and not everyone is saved with state money, such as Lufthansa, for example. This means: Basically, you should only invest money in the stock market that you can get over losing in an emergency. And it should go so far that you can withstand periods of persistently falling stock market prices (bear market) or even a crash. Stick picking is not for the faint of heart.
  • You should be prepared for a long-term exposure to the stock market. Stock picking does not mean frantically buying and selling stocks, but rather choosing which companies to buy stocks from if you are confident of their long-term success.
  • Stock picking is not for inexperienced investors. You should only do it if you want to dig deep into stock trading and the individual companies. Business knowledge is an advantage, as is knowledge of individual markets.
  • Don't bet everything on a stock or an industry just because you know what you're doing. This increases the risk of a total loss. If possible, spread your invested capital over several companies in different industries.
  • Think about the costs, because they reduce your profit. Fees and commissions are incurred on every stock purchase that you need to take into account when calculating your total return. The more often you buy or sell stocks, the higher the cost. A steady hand usually has a positive effect on the overall return.

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What are the advantages over ETFs or funds?

The alternative to stock picking are equity and mutual funds as well as exchange-traded index funds (ETFs). As an investor, you buy an entire portfolio of stocks with an equity fund. The fund management decides which stocks are included. The shares can come from all over the world or just from one country or from an index or a certain industry - depending on the objective of the equity fund. With ETFs there is no active selection of stocks, ETFs track the performance of an index, such as that of the DAX. ETFs are especially recommended for beginners, as they offer a relatively simple and inexpensive way to build up wealth with stocks over the long term.

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The advantage of stock picking is that you can choose stocks the way you want and don't have to pick up a package with dozens of individual stocks that you may not be convinced of. You can bring your own knowledge of markets and your ideas about the future development of the economy and filter out companies with no future when deciding which stocks to buy in 2021. In addition: An index fund cannot beat the overall market because it tracks it. A portfolio that has been put together by hand, on the other hand, can generate excess returns. Nevertheless: Stock-picking is not for newcomers to the stock market. Because if you don't have a good hand with your selection, you can lag far behind the development of the overall market.

Which stocks will buy in 2021?

Which stocks to buy in 2021 depends on your personal assessment, risk appetite and strategy. In recent years, various asset classes such as stocks, gold or real estate have grown almost in lockstep. It was the same with the various market segments. Technology stocks as well as classic consumer and industrial stocks benefited from the low interest rate environment. This made it difficult for fund managers and stock pickers alike to beat the overall market by selecting individual stocks. But especially during the Corona crisis there were strong fluctuations in the markets and individual countries, sectors and stocks developed significantly differently - the opportunity for stock pickers to identify stocks that are currently still undervalued.

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Costs, options & Co .: The depot comparison

If you want to buy an ETF or shares, you need a securities account. A comparison of the most important providers can be found in the table below, further detailed information in the large depot comparison.

Portfolio comparison for stocks and ETFs: portfolio fees, costs for orders and more

Presentation

Order fees

Custody fees

Savings plan fees

Which trading venues are available?

Number of tradable stocks, ETFs, funds, savings plans, crypto assets

Trading stocks at the weekend at Lang & Schwarz

What is the minimum order volume?

Web application / trading app

Demo account to practice

particularities

Per

Contra

Suitable for

Button link

intuitive app (no desktop offer available)

Stocks, ETFs and derivatives are traded without order commissions; only a flat rate of 1 euro for third-party costs

no

More than 4,000 stocks and ETFs can be saved permanently free of charge

LS Exchange; for ETFs: iShares

8,500 stocks and ETFs, more than 4,000 stock and ETF savings plans, 40,000 warrants, knock-out products and factor certificates

only app

No

attractively priced

no web application available, just a trading platform for stocks

Mobile phone users who also want to invest little money

Design is reminiscent of social media platforms with social trading as a core feature

around 2,000 shares free of commission; Spread fees 0.09 percent; Conversion fees, as it is traded in US dollars; Withdrawal fee five US dollars

no custody fees; only those who do not log in for twelve months pay 10 US dollars per month

no savings plans available

There are 17 trading venues for stocks, such as the US stock exchanges Nasdaq (511 stocks) and NYSE (825), Frankfurt (119), London (367)

2,000 stocks, many ETFs, other stocks and many other products as derivatives, 16 crypto values

$ 50; Copy-Value $ 500

both

Yes

Social trading: investors exchange market and stock exchange information on request; 16 cryptocurrencies; Minimum deposit when opening an account 500 euros

learning from others is easy; Exercise function

somewhat confusing price structure, which is only available in detail in English; relatively few stocks; no savings plans

Trendsetters who want to try modern investment techniques

new on the market, therefore modern and fresh design

Free of charge for orders with a trading volume of at least 500 euros via Gettex and for derivatives in direct trading with four partners; 1 euro with the same conditions at Lang & Schwarz; Order volume below EUR 500 and at other German trading venues: EUR 4

Free custody account management, but negative interest (0.5 percent) on the clearing account if more than 15 percent of the investment is available as cash over the quarter

280 ETFs eligible for savings plan free of charge; 351 ETFs eligible for savings plan with 0.2 percent (at least 0.80 euros) per execution

all German regional exchanges, Xetra, Tradegate, Quotrix, Gettex, Lang & Schwarz; another 16 partners for over-the-counter trading; 23 foreign stock exchanges

all stocks, funds, ETFs, certificates, leverage products, bonds that are listed on German stock exchanges; additional shares abroad; more than 600 ETFs are also eligible for savings plans

Saturday 10 a.m. to 1 p.m., Sunday 5 p.m. to 7 p.m.

web application only

No

Comprehensive range of securities with low order fees, some of which are even free of charge

Fees for clearing account (0.5 percent per year) as soon as the total exceeds 15 percent of the deposit value

Bargain hunters who can do without trading via mobile phone

tidy application despite a large selection of products

commission-free; no flat rate for third-party costs

free custody account management, but negative credit interest of 0.5 percent

no savings plans available

Tradegate, LS Exchange, Quotrix; 4 over-the-counter partners

more than 500,000 securities, including 7,300 stocks from 52 countries, approx. 1,000 ETFs and ETCs as well as certificates, warrants, leverage products; also crypto values: Bitcoin, Ethereum, Litecoin, Ripple, Bitcoin Cash

500 euro; 50 euros for cryptocurrencies

both

No

5 cryptocurrencies

free stock trading, cheap crypto trading

Minimum order volume, only three trading venues, negative interest on clearing account, no savings plans

Price-conscious investors who don't want to put any change

The app and desktop version are understandable and seem like a single piece

in the first year EUR 3.90 per order on all German stock exchanges; then 4.90 euros plus 0.25 percent on the order volume (min. 9.90, max. 59.90 euros); plus trading venue fee (min. 1.50 or 2.50 euros) and third-party fees

free deposit for three years; then linked to activities; otherwise 1.95 euros per month

For ETF, share and certificate savings plans, there is no issue surcharge, but a commission of 1.5 percent of the order volume per security and execution

all German trading venues; 16 partners for OTC trading; 12 foreign exchanges

14,500 stocks, 1,500 ETFs, 32,500 funds, 629,000 warrants, 1,085,000 certificates and 62,500 bonds

Saturday 10 a.m. to 1 p.m., Sunday 5 p.m. to 7 p.m.

both

No

free trading software (Pro-Trader); API interface for external software

many trading venues with a large product portfolio and extras

high order fees from the second year

Comfort-oriented investors who appreciate many options

simple and clear

no order fees in the first six months at Tradegate, L&S, Baader Bank, thereafter 5.90 euros per order plus trading venue fee (for the above 2 euros) and third-party fees; Minimum total costs on German stock exchanges between EUR 7.90 and EUR 11.32 per order

Deposit fee of 0.1 percent on the market value of the securities in custody; negative credit interest of 0.5 percent

250 selected ETF savings plans free of charge; additional savings plans per execution 1.50 euros

all German regional exchanges, Xetra, Tradegate, Gettex, L&S Exchange; another 16 partners for over-the-counter trading; 11 foreign trading venues

8,500 stocks and ETSs, more than 1,000 ETF savings plans, 5,000 funds (including ETFs); also derivatives and CFDs

both

No

Favorable conditions (0 to 3.90 euros per trade) for certificates and warrants from seven partners; many training videos

makes securities trading easy and understandable for beginners

Deposit fees, negative interest on clearing account

Fans of warrants and beginners who start trading cheaply

Easy to understand desktop application; App a little confusing because it is not a pure trading app

Stock orders EUR 3.95 in the first year when trading via Tradegate; otherwise at least 9.95 euros per trade, max. 69 euros; many funds and ETFs with no fees

no

270 ETF savings plans for free; all other ETF savings plans: 1.5 percent per savings plan execution; for equity funds: 1.5 percent plus mostly issuing fee

all German regional exchanges, Xetra, Tradegate; more than 20 foreign exchanges, more than 20 partners for over-the-counter trading

20,000 stocks and 7,000 funds (including ETFs); in addition, numerous bonds, currencies and commodities

Saturday 10 a.m. to 1 p.m., Sunday 5 p.m. to 7 p.m.

both

No

free trading software (ActiveTrader); API interface for external software

many trading venues with a huge product portfolio and extras

high order fees from the second year

Comfort-oriented investors who appreciate many options

Understandable texts, airy design

4.90 euros plus 0.25 percent of the market value, maximum 69.90 euros

no

all ETF savings plans for 0 euros; many share and fund savings plans from 1 euro, otherwise usually 1.75 percent of the market value

all German regional exchanges, Xetra and Tradegate; Stocks can also be traded in the US and Canada; Certificates & Co. also over the counter with 12 partners

all stocks, funds, ETFs, certificates, leverage products, bonds that are listed on German stock exchanges; additional shares abroad (USA, Canada); Number of savings plans: 720 ETFs, 640 funds, 480 stocks, five commodity certificates

both

No

inexpensive savings plans, all ETF variants free of charge

Trading on stock exchanges outside Germany is limited to a few trading venues

Savings plan lovers and shareholders without exotic country preferences

somewhat dusty design, the owner Commerzbank looks much fresher

5 euros for all securities on German trading venues plus 2 euros trading venue fee (plus costs for Xetra and regional exchanges); for US trading venues 10 euros plus 5 euros trading venue fee

negative credit interest of 0.5 percent for more than 250,000 euros on the clearing account

all available savings plans (around 200) for an execution fee of 1 euro; 50 to 500 euros savings rate

all German regional exchanges, Xetra, Tradegate, Quotrix, Lang & Schwarz; another 14 off-exchange partners US stock exchanges NYSE, Nasdaq, AMEX

all stocks, funds, ETFs, certificates, leverage products, bonds that are listed on German stock exchanges; additionally all securities of the three major US stock exchanges

web application only

No

simple price overview, comprehensive range of securities

no trading via app

Onvista fans who have cherished the website for a long time

is more aimed at professionals and offers many analysis tools

Usually 0.1 percent on the order volume with a minimum (examples: Tradegate 2 euros; Frankfurt: 5 plus at least 2.52 euros), shares on US stock exchanges cost 1 cent per share (at least 2 US dollars, maximum 1 percent of the trading volume )

only in the case of inactivity for more than a month and a deposit value below EUR 1,000: EUR 1 per month

Savings plans only through partner ebase (registration required)

Xetra, Frankfurt, Stuttgart, Tradegate and around 130 foreign stock exchanges; over-the-counter trading on the US stock market

More than 1.2 million tradable securities, stocks, ETFs, futures, options, warrants and many more exchange-traded securities and derivatives

both

Yes

expandable with external software; Minimum deposit when opening an account 2,000 euros; only one payment / month free of charge (otherwise 1 or 8 euros), no automated tax transfer

extensive security selection; various tools and order options for professionals

Real-time prices are chargeable, no separate savings plan offer, over-the-counter trading is very limited

Ambitious investors and professionals

also manageable for beginners

Gettex: EUR 0.99 per order or flat rate from EUR 2.99 per month with an unlimited number of securities purchases and sales as well as ETF savings plan executions; 3.99 euros per order for Xetra trading

no

if you opt for the flat rate fee of 2.99 euros per month, you will receive all savings plans free of charge; otherwise only one savings plan is free, each additional one costs 99 cents

Gettex, Xetra

4,000 stocks, 1,300 ETFs and ETF savings plans, 2,000 managed funds

Gettex only: 250 euros; Savings plans from 25 euros per month

both

No

low costs, attractive price model for active traders (only Gettex)

Minimum order volume at Gettex, only two trading venues, no derivatives

Cost-conscious high-volume traders who limit themselves to traditional investments

renounces design finesse, the focus is on the information

4.99 euros plus 0.25 percent of the order value (min. 8.99 euros to max. 54.99 euros); plus EUR 0.99 trading platform fee in Germany; Discount depending on the number of annual transactions from ten percent for 100 transactions to 80 percent for 5,000 transactions

Free custody account management for at least one transaction per quarter or assets of at least 10,000 euros, otherwise 11.97 euros per quarter

Many Deka ETF savings plans and 16 UBS ETF savings plans free of charge, all others and share savings plans: order fee of 2.5 percent per savings plan rate

all German regional exchanges, Xetra, Quotrix, Tradegate, Lang & Schwarz, L&S Exchange; another 17 over-the-counter partners; 29 foreign stock exchanges

9,000 stocks, 12,000 funds, 2,000 ETFs, 20,000 bonds, 1.3 million leverage products, plus stock savings plans, ETFs eligible for savings plans, funds and certificates

Saturday 10 a.m. to 1 p.m., Sunday 5 p.m. to 7 p.m.

both

No

Discount model for order fees

Trading on numerous stock exchanges

relatively high order fees, expensive savings plans

Sparkasse customers and users who appreciate many options

slightly outdated optics

10 euros per domestic order up to 10,000 euros, above 25 euros; for foreign execution venues, the cost per order is EUR 20 or EUR 35; Third-party fees are added to orders that are not processed via the Tradegate trading center

no

1.50 euros per savings plan execution, less or free of charge for special offers for a certain period of time

all German regional exchanges, Xetra, Quotrix, Tradegate; another 12 partners for over-the-counter trading; 31 foreign stock exchanges

More than 1.5 million tradable securities, including 22,000 funds and 2,000 securities savings plans, including 115 ETF savings plans

both

No

Trading on numerous stock exchanges, simple fee structure

high order fees

DKB customers and users who appreciate many options

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