How to Choose Stocks

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If you are a beginning investor it may be difficult to determine which stocks and bonds to begin investing in. If you are not accustomed to the stock market, and the rise and falls of the market, it may seem like you are reading a foreign language as you look at the investment reports. Single stock investing is a difficult thing to do. You may be better off going with a mutual fund, but you may still be wondering how to choose the best fund.

Check the Track Record

You should look at the track record of the stock or mutual fund. It should have a good track record and be a solid company. If you are looking at a mutual fund you should look at the track record of the of fund and of the funds managers. You want to purchase a stock with a good track record, and a mutual fund with a good record.

Look at Market Potential

Look at the potential in the market. It does not make sense to buy stocks of companies whose markets are decreasing. The company should have the ability to grow and expand their market. When you are considering a mutual fund, you should look at the types of companies they are investing in, and make the same judgment calls.

Watch Growth and Changes in Leadership

You need to keep an eye on the companies and make sure that the principles that caused you to feel that the stock was a good investment are still in place. The company should continue to grow at a steady rate.

While you are holding in for the long haul, if something in the company changes, it does not make sense to stay with the stock. If you are paying attention to the company, you should be able to sell the stock before it drops too much.

Stay Focused Even in Difficult Markets

Remember to make real money by investing the trick is to stick with the company for the long haul.

Choose companies that you trust, and stick with them. Companies may go through difficult times, but often times they will recover. If the company is still under sound leadership and has the same potential, then you should stick with them.

Tips:

  1. If you are unsure about which stocks to pick, talk to a financial advisor. They can offer help and guidance about how to choose stocks that fit inside of your financial plan

  2. Remember to diversify your investment portfolio. This means that you should have your money invested in several different stocks and/or mutual funds. It is foolish to have all of your money in one stock or mutual fund, because if it were to fail you would lose everything. Diversifying spreads the risk. This is why it is important to have investments in addition to your 401(k) and other retirement accounts. 

  3. Do not begin serious investing, aside from retirement, until you are debt free, except for your mortgage. It does not make sense to invest when you are paying high interest rates. Take the time to set up a debt payment plan today. 

  4. Considering subscribing to a service that will give you updates on your stocks and mutual funds so that you can keep an eye on the market. Additionally, keep an eye on the health of the company. Reading annual reports and plans will help you to better understand if the company is still one that you want to invest in.

  1. If you are working on getting out of debt, you can practice investing by choosing specific stocks or mutual funds and track how they do over time. This can help you understand the market better so that when you have money to invest, you can do it confidently.