How Do You Know Which Company's Stocks Are Right for Investing?


Quick Answer

To determine which company’s stocks are right for your investments, gain an understanding of what the company does before you buy its stock and look at the stock’s bottom line revenues, explains MarketWatch. Lee Brodie for CNBC also suggests investing in profitable stocks.

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Full Answer

Understand the company goals and get familiar with the sector with which the firm operates and does business, reports MarketWatch. Invest in brands you are already familiar with and currently use, such as a chain of restaurants where you frequently dine. Avoid companies that do not have management that understands how the company plans to make money, and stay clear of these companies if you do not understand this information as well. Examine the company’s bottom line to see if its expenses outweigh the company's profit, and compare it to other companies in its sector to see if the company has more or less debt than similar companies. To get more return on investment, buy stocks with dividends.

If you like a stock, you can wait for the stock to temporarily drop in price by at least 5 to 10 percent before investing in it, according to Brodie. This action allows you to acquire the stock at an ideal price.

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