| How to Find a Good Stock Investment

How to Find a Good Stock Investment


What Makes a Good Stock Investment?

A good stock investment is an investment in a company that gives you a good return. This means that you buy shares of stock in a company and the value of the stock in the form of its price increases from the price you paid.

I’m sure we all understand the idea that more money is better, but how do we find these good stock investments? Unfortunately for everyone, we can’t predict what a stock will do. Even a stock that has been consistently going up for years could take a downturn. We can’t forecast what a stock will do, but we can take steps to make an investment and not a gamble.

Do Your Research

When is an investment a gamble? Many will argue that investing is not gambling, and it isn’t, except when you invest in a company you know absolutely nothing about. If your friend thinks a certain company is going to go up and they tell you but don’t tell you why they think so, if you buy some stock in that company without any further research, you are basically gambling.

Sure, that company could go up, but you could increase your chances quite a bit by doing some research first. You might find after looking into it that the company is about to declare bankruptcy and if you were to invest on that day you would lose your entire investment.

Research is the most important thing you can do when looking for a good stock investment. If you find a company on a tip, that’s fine, just make sure you do your research. Fundamental analysis is the way to go, but if you so choose, you could add in a little technical analysis.

Read all the companies financial statements in their 10Q and 10K statements. Look at the history of the company and read what their management has to say. How the company is managed is a very important part of every company. Use online research tools and keep up with the news on that company.

When Do You Stop Looking?

You should not invest in too many different stocks at once. If you invest in 50 different companies, you will not have the time to keep up with the proper research of each. You should always be spending time on your investments. Once you find a good one, don’t assume it will be fine on its own, keep researching at least an hour or so per week.

If you are confident in your current portfolio, there is no reason to actively seek new investments, but you can always keep your eye out. Don’t waste hours and hours of your time researching a new stock unless you are actually considering buying it. Keep up with the news and stay active in industries you may be interested in.

Who Should You Listen To?

Taking stock advice is a tricky subject. There are a ton of websites, magazines, and television shows suggesting their top stock picks. Who should you listen to? First of all, always disregard advice from those who have a bad track record, make little to no money with their investments, give no reasoning as to why they choose a stock, and are only suggesting a stock to drive up the price for himself or to make a commission. I’m sure there are plenty other reasons to disregard stock advice, so always stay sharp.

Even if you decide to listen to someone, good advice or not, always do your research. Proper research is the key to successful stock investing. I’m not saying that if you do your research you should consistently make an above average return. There is no way to guarantee this at all. Just make sure you always research companies and keep researching them if you own them.

How Should You Invest in the Stock Market?

Some people may find the constant research overwhelming and too time consuming. You don’t have to invest directly in stocks to invest in the stock market. If you prefer a less hands-on approach, look into mutual funds or ETFs in order to ensure diversification and hopefully earn an appropriate return.

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