When it comes to specific stocks, the best stock investments can vary wildly over time. Even though there are no guarantees when investing in stock, keeping the following tips in mind will help you select the best options for your portfolio.
1. Keep long-term gains in mind.
Talk of day trading may make new investors eager to "buy low and sell high" for instant money. However, the best stock investments will appreciate slowly over time, with a low amount of risk to the investor. Select stocks from companies with proven track records, and don't sell them at the first slight dip in the market.
2. Investigate companies before investing in stocks.
In a list of "20 Stock-Investing Tips", the Morningstar investing news and research site described the appropriate mindset as "Behave like an owner." Approach the purchase of a stock in the same way as you would the acquisition of the company. Research current and past performance, industry standing, recent news and more to determine whether a business is worthy of your money.
3. Study stock ratings.
Stock ratings can give you a good overview of a stock's performance and suitability for your portfolio. Zacks Investment Research and MSN Money both offer ratings of individual stocks along with general investing advice. If these free resources don't offer enough information, TheStreet.com also provides ratings reports for a fee.
4. Consider investing in a mutual fund.
A mutual fund can help protect investors from the vagaries of the market and individual company performance by allowing them to invest in a wide-ranging portfolio of stocks. This can also be a much more manageable approach for the first-time investor.
5. Look for trends.
Although trends can be short-term, such as the release of a hot new tech product, they can also include larger societal shifts. The aging of the U.S. population is one example of a trend that could influence investing decisions. As the Baby Boomers enter their retirement years and medical advances constantly increase the average life expectancy, everything from pharmaceutical companies to firms offering long-term care insurance stand to see increased profits.
6. Let your conscience guide you.
Even the very best stock investments aren't worth compromising your personal principles. You may not feel comfortable investing in companies that employ workers in developing countries or factories that produce dangerous chemicals. Letting your conscience guide your picks doesn't necessarily mean passing up lucrative stocks. For instance, if you're committed to environmental causes, green energy is a booming business that could lead to future financial gain with investments in the right companies.
7. Trust your instincts.
Although selecting stocks should be a carefully considered process examining all of the available information on a potential investment, sometimes you just have to go with a gut feeling. If a company just doesn't feel right to you, then you should invest your money elsewhere. On the other hand, if your research leaves you undecided but you're sure this company is going places, maybe this is a time to take a risk.