If you're a newcomer to investing, how should you begin to choose stocks in which to possibly invest?
For starters, think of them as companies and businesses instead of stocks. That's a critical distinction that's lost on way too many people. Stocks are, after all, actual small pieces of an ongoing business, not lottery-like slips of paper.
Next, don't make the mistake that many people make -- basing a decision to buy stock in a company on just one or two factors. For example, some people see what they think is a low P/E ratio and think that's enough. Or maybe they've read an article about a company that made it seem irresistible.
Instead, take the time to learn how to evaluate companies. Learn how to read financial statements. Assess P/E ratios along with many other numbers. Read widely about companies that interest you, ideally in industries that you're familiar with and would enjoy keeping up with. All over Fooldom, you'll come across many things to consider when evaluating a company. The more you learn, the better your investment decisions and performance are likely to be.
These articles can help you master some basics:
- Tom Gardner Interviews Philip Durell
- The Key to Investing Is Nothing New
- Finding Lynch's 10-Baggers
- Extra Dividends, Extra Growth
Here's a perhaps-too-detailed list of great resources that can help anyone become a more sophisticated investor. It was prepared for our Teens & Their Money area, but it's applicable to adults as well.
To learn more about investing Foolishly, visit our Fool's School and our Investing Basics area. Or check out some of our inexpensive and well-regarded online how-to guides, which feature money-back guarantees. You can also learn all about brokerages and find one that's right for you in our Broker Center.