The job of picking the right stock is not easy because no foolproof rule seems to exist by which it can be determined what a stock’s price is likely to do in the future. Stock picking may be described as a situation in which you use a systematic form of analysis to conclude that a particular stock will turn out to be a good investment and, therefore, you should add it to your existing portfolio. The position can be either long or short and will vary with your outlook for the particular stock’s price. Nevertheless, by a careful consideration of numerous factors, any investor like you can get a better sense of future stock prices than by relying on plain and simple guesswork. As forecasting is never an exact science, any investor or analyst who uses any forecasting technique should always allow for a margin of error in the calculations. In reality, there is no one way to pick stocks. It is therefore better to think each method to pick stocks as just an application of a theory, in other words, a “best guess” of how to invest.

Remember, if you rightly pick your stocks, you can greatly increase your personal wealth. Have you ever imagined what could have happened if you purchased shares of Microsoft at the company’s initial public offering in 1986? If you bought and held those shares, your return would have been somewhere around 35,000% by now.

Put differently, a $10,000 investment could have brought you about $3.5 million. So, if you exercise your “best guess,” which can give you a fair indication of the things to come, you can pick a great stock and end up being a rich person. On the other hand, if you pick the wrong stock, you may land in trouble.