How To Pick Stocks

If you are new to stock investing, then the first question you may want answered is “how can I pick stocks and make a profit?”,  or more specifically, “what are the best investment vehicles to be involved with?”

The choice is huge with regards to investment vehicles. There are mutual funds, bonds and stocks but in this article I aim to focus on the purchase of stocks.

It is important to understand what stocks actually are before considering any investment. Stocks are an asset that companies can use to raise money for a wide range of purposes. Once you have picked and purchased the stock of a company you become a part owner of the company.

Research Companies And Sectors

For a company to be able to offer their stock on the market they first have to be registered and be provided with a ticker symbol. A ticker symbol is an identification tag, if you will, for a stock. This enables people to track the company and stock with ease.

When learning how to pick stocks you need to know the different types of stock that companies offer, the most popular ones being penny stocks and blue chip. The blue chip stocks are the safest to invest in as the companies who the stock represents are considered to be financially secure. Blue chip is a stock all savvy investors will have in their portfolio.

When a company does its finances at the end of the quarter or year, if it shows that the company has made a profit, then it decides whether or not to pay a dividend to its stockholders.  Investors in companies that pay dividends enjoy the added feature of being “paid to wait”, and many companies and ETFs pay attractive dividends, some with yields of over 5%.

By reinvesting your dividends, you will also be allowed to build your positions in these companies, and realize even more profits as your positions grow.  An investment strategy that focuses on investing for dividend yield should be considered as part of your trading plan.

How To Pick Stocks And Invest Without A Broker

If you are wondering how to purchase stocks without the use of a broker there are a number of avenues you can take. You can use the companies direct stock purchase plan if they have one. Many companies offer direct purchase plans and this is much better than going through a broker as you will not incur any fee’s this way.

You could use a DRIP program, this is great if the company you are interested in does not have a plan to enable you to buy the stock direct, then they may have a dividend reinvestment plan or DRIP. To qualify for this you must own at least one share of the company before you can join the plan.

There are also specialised services where you can buy stocks on an individual basis. This is great while you are learning how to purchase stocks as you can purchase as little as one stock to begin with, and as your confidence grows, purchase more.

If you feel more comfortable picking stocks through a broker then you must realize that you will have to pay fee’s or commissions. If dealing with stocks directly makes you uncomfortable, then using a broker is the best route for you.