How to determine which are the best stocks you should buy

2010-05-01 02:59
One of the main concerns of people around the world today is to make money. Most people work for a living, others run companies, but there are some people that take on the chance of investing in stocks; and let me tell you they aren’t doing so badly.

But there are some things you should know before you start investing in stocks. Since advice is something we cannot go without when we start looking for ways to make money, you can be sure that the stock market is no exception. One cannot enter this game by simply purchasing random stocks and hope for the best. There are some methods that should be considered.

Stock picks are the options presented to you which are believed to earn the most revenue for the investor. These are the best stocks you can choose at a certain time. While there are many companies which have potential for growth and development, there are some methods through which one can determine the best options.

The methods or strategies through which stock picks are chosen consist of analyzing market and sector timing, buying and holding or others. Each of them has their criteria through which the stock picks are chosen, but there is no better method than financial evaluation.

Financial evaluation represents the process through which a company’s past, present and probable future are analyzed by studying the behavior of its stock. The steps of this method are to determine the price to earnings ratio, the price to book ratio and return on equity. These are the factors that will determine whether you have chosen the best stocks or not.

The first ratio that can help you determine the best stocks is price to earnings. The net income of a company in the last twelve months period is divided to number of shares. Thus you will obtain the annual earnings for each share. The current price for a share is divided to those annual earnings in order to obtain the price to earnings ratio, the first step of stock picks.

The other ratio used to determine if your stock picks are profitable is price to book. The book value of a share represents the portion of a company held by its shareholders. Dividing shareholder’s equity by the number of shares outstanding will result in the price to book ratio.

Return on equity is probably the most important ratio that determines how efficient your investment is. Determining how well a company uses every invested dollar for generating profits is the most obvious method that can characterize a company’s efficiency, which can be observed through this ratio.

If a person would consider these methods and apply them accordingly, rewards are sure to come. Since this is the ultimate goal for each individual, and you plan to enter the investors’ world, then you need to be sure that you only purchase the best stocks.

These are just a few of a huge number of methods and strategies which you can use in making the best choices when it comes to stocks. If you want to know more information about how to make money with stock investments, all you need to do is visit

Choosing the can result in a person’s financial independence. These methods and the information available on the website mentioned afore and can help you make the best .

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