How To Choose The Right Stocks
If you are going to start investing, one option is to purchase stocks. Stocks, or shares in a company, can be very valuable if the company does well. They also, however, have the potential to cost you money. One way to get good advice about choosing stocks to work with a broker. However, you still want to make sure that you have some say in your investments. Here are some tips to help you find out which companies provide the best investment opportunity.
Never try to "wing it" when investing. This will almost always cost you money, unless you are incredibly lucky. Instead, take some time to research before investing. The best investment opportunities do not disappear overnight, so do your research.
The question, however, is how to do this research. First, you need to research the company. You can do this by gathering several public-disclosure documents that they file with the Securities and Exchange Commission. You want to get your hands on the quarterly 10-Q that is the most recent, the DEF 14A (proxy statement), and the yearly 10-K.
As you study these documents, look at the amount of debt the company has. Too much debt will make it difficult for the company to grow. If a company is doing well, and these are the companies you want to invest in, they will be able to pay their debts with their existing cash flow.
The proxy statement tells you about the management of the company. It can show, for instance, the salaries the management receives. What you want to look at on this document is the number of shares that management and executives hold in the company. If the leadership has a vested interest in the company, it can be a good indicator that they will work for the benefit of the shareholders, since they are shareholders themselves.
You also want to look at the past stock record of the particular company. You want to find a stock that is showing steady growth over time, currently is at a good price, is offered by a company that has sufficient cash reserves, and appears to be from a company whose finances are in order. This is a good stock to buy.
Remember, on the stock market, there are no guarantees. You simply have to take an educated gamble and choose stocks that seem to be a good bet. With these tools, however, you will not be choosing blindly, and chances are fairly high you will get a good stock.
