There are plenty of stocks to choose from in our public stock markets. This makes the decision to buy any particular stock over another difficult. How are you supposed to know which ones to pick and which to leave behind? In this piece we hope to show you a few basic strategies that you can use to figure this out. We will talk about the very simple ideas that need to be a part of your investing strategy as well as some things that you might never have thought of before. If you pay attention to what is written here then you may have a chance to do decently well in the markets.
Don’t Go With Something You Heard About Through The Grapevine
It is tempting to just take the advice or opinions of those we work with or those we do business with or even those in our own families. While this may seem to have some appeal to it at first, you are far better off suppressing the urge to do so. There are a lot of ways that you can go wrong taking advice from those close to you.
The first big problem with blindly trusting what a family member has to say is the fact that they likely don’t know what they are talking about either.
Another issue is that they may be steering you in the wrong direction and it could cause tension in that relationship.
The vast majority of people like to invest in things that are making big waves in the market right now. That is when the average person starts to hear about a particular stock. The problem with investing at that point is that the stock has already been on a run. You are not getting in at a good price, and you are therefore overpaying for something that could easily go down in value on you in a hurry. Instead, you should be focused on legitimate fundamental factors that make a stock a worthwhile investment.
Taking A Look At Price To Earnings Ratios
We won’t get overly complex in this article about all of the metrics that a person could potentially consider when reviewing the best stocks to buy for their portfolio. However, we will take a look at this most basic of measurements that has been used by amateurs and professionals alike. This measurement is the price to earnings (P/E) ratio. It measures something simple but profound.
That is the price of the shares of the stock against what that stock is currently earning per share.
A stock that carries a lot P/E ratio may be in the bargain bin for whatever reason and may be worth a look over by those who are considering purchasing a good company for cheap. However, it is important to be cautious here because it is also possible that the company deserves a lot P/E ratio for whatever reason and has thus been traded down to that point. Definitely proceed with caution.
High P/E ratio stocks are not necessarily bad investments, but one will have to do a pretty good job of doing their research to make sure they have found something worth putting some money into.
Companies with high P/E ratios tend to be those that are growing very rapidly. They may also be in an exciting industry and be attracting a lot of renewed interest in their products. However, do not assume that the P/E ratio alone tells you about the best stocks to buy at any given time.
Listening To Earnings Calls
If you have a little bit of time on your weekend to spare there is little better that you could do to help with your investing than to listen in on some conference calls of companies that you have invested in or those that you are considering putting some money into.
The reason to do this is because those earnings calls are required of all public companies, and they must post the audio out to the public.
These calls involve some of the top brass at any given company as well as investment bankers and other interested parties who attend the events as well. The high ranking officials from the company will go over the latest earnings and revenue information as well as provide some color about where they see the business heading next. That is all incredibly valuable information that you will simply miss out on if you don’t listen in to these calls.
The earnings calls can seem a little tedious at first, but when you realize that you are literally getting the information about a public company directly from those who are most intimately involved with the company itself then you start to see how interesting this could be.
It is healthy for your investing to take some time to listen to these calls as they just might provide the insights that you need to decide to invest or not.
Perhaps you will learn just a little bit more about what the company plans to do with this product or that product. Maybe you will be able to better see their vision for growth into the future. No matter what, you will certainly find something that is of value to you in that call.
Invest In Something That Has A Long Track Record
It is appealing to invest in the latest and hottest thing out there. We all want to be able to say that we got in on the ground floor of whatever the next big thing turns out to be, but the vast majority of us will not reach this point. We don’t have some special insight as to what that next great thing will be, and investing as if we do have this knowledge is just foolish.
Instead of chasing fads the wise investor invests in companies that have proven themselves over the years to be able to continue to grow earnings and do well. That is really the only way to know that a company that you are putting money into has at least done well for those who trusted in it in the past. Your results may be different, but it is at least a bit heartening to know that you are putting your money away in something that has done well so far.
Don’t Move Your Money Around Often
The final piece of advice for this article is that you shouldn’t move your money around often.
You don’t have to keep your finger on the pulse of the market at every waking money and doing so will just fatigue you. Instead, focus on making good choices in the beginning and then letting those investments do their thing.
The people who end up with the largest returns on investment generally are those who do not trade around very often if at all. They are content with where they have put their money and they just let it grow. You can be like that too and outdo a vast majority of the investing public.