How to Identify High Upside, Low Downside Stocks

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How to Identify High Upside, Low Downside Stocks
How to Identify High Upside, Low Downside Stocks

When you’re investing, you’re always looking for ways to get the best payout for the least risk. You probably already keep an eye on the markets, and you know that investing in diversified funds will reduce your risk. But what are some tips you can use to identify up-and-coming stocks on your own?

Look for Repeating Patterns

Some stocks (like fashions) never really go out of style; they just lay low for a while. These are often shorter-term investments, as you’ll want to sell before the price dips again.
For example, silver hit an all-time high of $50 per ounce in 2011. While that was an extreme spike in value, smaller fluctuations are typical, with short cycles of under a year. You might try looking for stocks with a similar pattern, so you can buy in a trough and wait for the crest.
If you’re feeling bold, you can even wait for those rare surges —but you’ll need to be very patient, too.

High Potential, Low Recognition

Sometimes, businesses don’t get the attention they deserve for their future earnings potential. This can be a huge opportunity for investors.
One way to spot these businesses is to get an idea of what’s going on in their budget. If they’re spending more than they bring in, you’ll probably want to pass. But if they’re out-performing their expenses, and still not getting a lot of ground on the market, you might have just found a good catch.
It’s good to be cautious in this case, though —even if a company seems revolutionary, sometimes great ideas on paper don’t work so well on the market.

Learn the Market

As easy as it is to read a list of “quick tips,” sometimes you have to really dig into your own research. Find investment opportunities that just sound interesting. See how these options trend over time, to help determine if that’s the right market for you. Learn to calculate the upside and downside capture ratios, and what they mean.
And if you don’t have time to do it yourself, remember that there are investment professionals available to help.
There’s always a risk when it comes to investment, but these tips should help you maximize your rewards.

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