The Art of Picking Individual Stocks for a Long-⁠Term Portfolio - What a Private Investor Should Look At

In recent years, private investors have gained access to practically everything they need to pick stocks with good investment prospects. They now have financial statements, analytical services, screeners and real-⁠time trading data at their fingertips. Yet the results have barely changed: over long periods, most investors either fail to beat the market or consistently lag behind it. The problem is not a lack of information but psychology.

The most common mistakes

Investors often make a number of mistakes, so let us look at them in more detail.

Focusing on the price. If the price is rising, many people consider the stock promising, but this says nothing about the company. One striking example is Pets.com, which sold pet supplies online, something that sounded “revolutionary” at the time. Having “.com” in the name was enough to drive investors crazy.

In 2000 the company held its IPO, and its shares quickly soared. Yet behind the facade there was neither profit nor a sustainable business model. The company spent heavily on marketing, including advertising during the Super Bowl. But just 9 months after the IPO it went bankrupt. The shares fell almost to zero, and the business model turned out to be loss-⁠making: delivering heavy pet food cost more than the margin allowed. The growth was driven purely by the hype around the internet and “.com”, not by fundamentals.

Relying on plans, projects and promises. We all know that not every plan and not every dream comes true. The same goes for companies. Wanting to do something and actually doing it are, as the saying goes, two very different things. So you should not trust presentations and promises. It is far more important to rely on actual results that have already been confirmed by figures and practice.

Relying on the company’s brand and fame. Name recognition sometimes only shows that the company has a strong PR team. Alternatively, it may operate in the B2C segment and simply come up more often in your everyday life. But this does not always mean a high-⁠quality, sustainable business.

We do not consider companies that have been profitable for less than 10 years for inclusion in an investment portfolio. The reason is that their stability over time has not been proven.

For example, novice investors often pay attention to Tesla. To a large extent this is due to the media presence of Elon Musk, who really does know how to attract attention to his projects. At the same time, the company itself started operating consistently without losses only relatively recently.

Listening to brokers’ advice. The problem with brokers’ advice is that there is always a conflict of interest. Their income comes from trading commissions, that is, from your purchases and sales. A broker benefits from an active client who trades regularly, not from an investor who calmly holds stocks for years. That is why they will keep offering you “interesting” ideas, and their commissions will eat up all your profit. Think about why brokers are happy to teach you trading for free, yet none of them will teach you long-⁠term investing for free.

Selling during a decline. When a stock falls, you do not lose money until you lock in the loss by selling. The loss happens at the moment of the trade. But how can you tell a temporary decline of a good company from the start of a long slide of a weak business? There is only one answer: by studying its business.

The better you understand a business, the more calmly you react to price fluctuations. A telling example is the US mortgage crisis. Back then the shares of practically all banks fell, even those that had nothing to do with mortgages. Why? Fear and panic in the market, and the desire to save at least something.

But if you understand perfectly well that the bank whose shares you hold is not exposed to mortgage risks and has a sound financial position, you have no reason to panic. At such moments the right decision may be not to sell but, on the contrary, to take advantage of the situation and buy more shares.

Experience also plays a special role, and it comes with every market decline and every rally you live through. For example, the first time the market drops by 10%, you will feel anxious and want to sell your shares. But then prices will recover and even rise. The next wave will be easier to get through. The same goes for periods of rapid growth. The more such cycles you go through, the easier it is to resist the urge to lock in profits at the peak and to keep your position in quality stocks instead.

Fear of missing a unique opportunity. Greed, or, as it is now commonly called, FOMO (Fear Of Missing Out), is the fear of missing an opportunity. In investing it shows up when a stock’s price has already risen. In such cases many people buy not on the basis of sober calculation but out of fear of “missing out on the profits”.

Another situation: you bought good stocks, but their price is not rising. Meanwhile, a friend’s portfolio is showing a profit. You start to doubt your choice. In the end you sell your stocks and buy the ones that have risen in price, and then they fall.

So give up trying to “make all the money” right away. If a friend has made money, be happy for them and leave your own portfolio alone. Start a FOMO journal. Every time you catch this feeling, write down the date, the ticker of the stock you wanted to buy and its price. Add a brief conclusion from your analysis of its financial metrics.

Come back to these notes from time to time and see what happened to those stocks after 3 months, six months and a year. Over time this helps you make calmer and more balanced decisions.

How I choose stocks

I do not look at a company’s plans; I analyze its financial statements. They are what show how the company actually runs its business. The set of metrics is fairly small, and the key ones are:

• revenue;
• profit (EPS);
• margins;
• debt.

What matters is not only today’s values but also how they have changed over the last 10 years. If all the metrics are growing (except the share of debt in assets, where it is the other way around), that is good.

The quality of growth matters too: how steady it is and how the growth rate of the metrics behaves, whether it increases or decreases from year to year. One good year means nothing; 10 years of stable growth is already a pattern that characterizes a sustainable (sometimes unique) business.

Now that you have selected companies with consistently high growth, it is important to understand whether their shares are overpriced. The market may not only have recognized these companies before you did but also already priced in excessive optimism.

This is what the P/E ratio (Price / Earnings, the share price divided by earnings per share) is for. It shows how many years it would take for the company’s earnings to “pay back” the current share price, assuming current earnings and price stay the same.

For the market as a whole, this ratio usually falls in the 15-⁠25 range:

• P/E < 15 - the market is cheap / fear;
• 15-⁠20 - historical norm;
• 20-⁠25 - already somewhat expensive;
• 25+ - the market is pricing in strong growth, or the market is overheated.

Segment	Normal P/E
Banks	10-13
Whole market (S&P 500)	17-19
Technology (Tech)	20-35
Pharmaceuticals (Big Pharma)	12-20
Utilities	14-20

I look at the current P/E of the company I am analyzing and compare it with the “normal” P/E for the sector it operates in. Then I assess whether its price is low, reasonable or inflated. If it is low or reasonable, I decide to buy the stock. I do not add overvalued stocks to my portfolio.

Recommendations for investors

You need to understand that your goal is not to “make money on stocks” but to build a portfolio. It is important to manage it so that it helps you achieve your life goals, for example, a calm and financially secure retirement. A few practical tips:

1. Choose companies carefully based on their fundamental economic indicators over the last 10 years. Use the online tools available for this. A company’s valuation should be at least $5 billion: this will greatly reduce the amount of work you have to do.
2. Invest gradually. There is no need to put all your money into individual stocks at once. Invest a small part, gain experience with it and gradually increase the size of your portfolio.
3. Do not check on your portfolio too often; review it only once a year, on schedule. In practice this is hard, so it is better to lengthen the intervals between checks gradually: first every other day, then every couple of days, then once a week and so on.
4. If you have extra money to invest during the year, create a second portfolio, preferably in a separate sub-⁠account.
5. Unsubscribe from all social media channels with “signals” and “insider tips”. Look only at companies’ financial statements.

If the market has fallen sharply, wait 72 hours. Then calmly analyze the companies in your portfolio: how their revenue, profit and other key metrics in their financial statements have changed.

Wait for the next quarterly report and check the figures again. If they have not deteriorated, all is well. If they have changed for the worse, do not rush to sell; wait another three months and check the financial report again. For large companies valued at more than $5 billion, the metrics change very slowly. That is why it is important to react not to price fluctuations but to real changes in the company’s economics. Decisions should be based on business metrics, not on the stock chart.

Wishing you successful and calm investing!

The author’s Telegram channel: https://t.me/dohod_investment

This article was first published on Finversia on 11.06.2026.