Types of stocks for investing/trading

1. Index linked stocks - the 30 component stocks
- relatively safe stocks for longer term investment
- the profitability can be very much depend on the entry and exit timing
- quality stocks and widely covered by analysts
- very suitable for those who have no fundamental analysis knowledge and have lots of idle cash for big caps stocks

2. Penny stocks with irregular earnings and uncertain fundamentals
- ideal stocks for day trading or short term trading, if the daily volume is high
- most young traders would like this category of stocks because of the low entry value
- may gain if good in technical analysis tools like pivot point analysis and chart pattern

3. Small or mid caps quality stocks that are illiquid but with good record of dividend
- fundamentally sound stocks which are priced lower, with consistent earnings and dividend record, and undervalued at the time of entry
- good for long term investment for conservative investors not be attractive to traders
- once identified or taken position, it takes not much time to monitor.

4. Small and mid caps quality stocks that are liquid
- stocks that often covered by analysts and being played up as stocks in theme play, and these are the so called second liners
- the most popular stocks for retail traders and investors because of their heavy coverage by news and analysts
- target of professionals and syndicates, not for long term investment because of its swings many times a year
- will trade by fund managers as well, traders must be cautious of the right timing to enter and exit
- the stocks that keep the market vibrant and active, and also the battlefield for retail investors where the 5% of successful traders make their money
- chart analysis is essential for trading in this category, and fundamental valuation is a must to anticipate possible exit by institutional funds

5. Poor fundamental stocks
- stocks under PN17 or those stocks that have cash flow problem or continuous negative earnings
- appeals to gamblers and day traders
- insiders and syndicates may play up when there are opportunities to spread news to their advantage
- need to watch closely the stock price volume actions before venturing in this gambling stock

1. Long term investors - index linked stocks (1)
2. Position traders - quality small caps and mid caps stocks as in (3)
3. Swing and trend traders - heavy coverage small and mid caps stocks as in (4)