It is a well-known fact that success in the stock market is all about picking the right stock at the right time. Though there are many websites and experts to guide you about the best stocks to make short-term and long-term investments, you need to conduct a research yourself as ultimately you will be investing your own money in the stocks. So, go through the useful guidelines given below .
How to Choose Stocks
It is believed that the best stocks to invest in this year would be of those companies belonging to sectors such as information technology, real estate, and financial services which took a huge beating in the past recession. Those who track the stock market must have observed how drastically the stock prices fell in a very short period. This not only caused losses to many investors, but also caused many investors to stay away from the stock markets. However, over a few months, the stocks of these firms have shown a steady uptrend which is a sign of recovery. You can consider buying those stocks which are cheap in valuations as compared to their peers.
Stocks should not be selected only because they are available cheap. You should also consider the fundamentals of these companies. Invest only in those stocks which have strong fundamentals and a fine track record of giving decent returns to investors. Look for the management of the company and their personal track record of handling businesses. Also, carefully study the business model of the company. This is because the business models of certain firms are subject to market fluctuations.
For example, oil marketing companies can suffer with a decrease in oil prices as it can affect their margins. Stocks of cement manufacturing companies can go down in the phase when the cement rates and demand lowers. However, the demand for products of companies selling consumer goods such as electronic items and cosmetics will always be intact and so will be the business of health care and medicine providers. Infrastructure development, engineering and construction firms have a good future considering the healthy order inflow and cash reserves which they have. So, you can consider buying stock belonging to these sectors in this year.
While investing in stocks, you should also ensure that the company does not have too much of a debt burden. There are many debt free and financially sound companies which you can invest in. Also, find out whether the company you have chosen to invest pays dividends and issues bonus shares regularly. Liquidity is also important for companies to survive in hard times. So, check for how much cash the company has.
A company with a strong balance sheet is the one which you should invest your hard-earned money in. A suggestion which is commonly given is to check if the price to earnings ratio of the stock is less than its peers for a good investment call. At the same time, the earnings per share ratio should be high for good returns. Stock trading, which involves investing in a stock for a short time should not be done in penny stocks which can fall considerably in a few minutes.
Stock investing in a systematic manner can surely give you great financial returns in this year. Hoping that this article on best stocks to invest will guide you well, I sign off here wishing you all the best for your investments!
DISCLAIMER: This article is just for reference purposes and does not recommend any stock market transactions.