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11 October 2010 ~ 0 Comments

Picking the Right Common Stocks!

Anyone who suggests that investing in the stock market is fairly easy to try to sell you something! The fact is that investing in the stock market is difficult. Do only one or two mistakes, and if you are not careful, you can delete several years of careful saving and retirement security in the blink of an eye. But there are several things you can do to help stack the deck in your favor, and that is part of what we are talking in this article today. Mostly we will focus on how to follow the rules for selecting good shares.

The first rule is to try to buy a stock company, which is a clear industry leader. On the company’s position, which is a very important role in its specific field and if you can not afford anything in the industry-leading stocks, at least try to get your hands on something else. The second rule is to try to find a very specific sector, which have a limited amount of competition and less strong competition from business and industry in general, and easier for them to make excessive profits from year to year.

The third rule is to prevent industries, if possible, the figures are visible in the consumer price index or key players in a country whose gross domestic product or GDP. We are talking about the auto industry or the food industry, steel industry to name a few. These high-level industries are often the first to fall during periods of recession (by definition) and are also companies that are more likely to be more regulated by government. More regulation almost always results in lower profits and stock prices depressed.

The fourth rule is to look for companies with price / earnings ratio of at least equal to or less than the S&P500 index price earnings ratio. Sure, you might have trouble finding these companies, but they are there. The fifth rule is to seek companies that have a history of paying dividends, but do not pay their just going to want to find companies that have a history of increasing dividends over time. Dividends are a very good sign for the stock price.

Finally, try to stay away from companies that are heavily indebted and have a lot of debt on its balance sheet. Especially now, in 2010, credit has dried up and the seam is much more to these companies. Share prices begin to reflect the high negative charges on the debt you want to stay away from these types of highly leveraged companies, if possible. So you have six easy to follow the rules for choosing the best stocks. As with any investment decision, be sure to do your own research and fundamental analysis of underlying business performance before investing in equities in the long term.

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