If you are new to this business, then the first question you would ask is how to choose the best share to buy among all the other? What makes one share superior to the other? What are the risks involved in buying shares? What is the criterion to buy a stock? All of these valid questions will be entertained in this article.
Everybody wants the best. But not everybody is fortuned to have it. The reason is that we overlook the most important points that should be kept in mind and analyzed before buying the stock. A lot of thinking and paperwork is required. Some homework has to be done. When you are new to this business, you might be fooled more easily. To avoid that, you should have your homework done.
Following are some key points to decide on the Best Shares to Buy:
- Growth in the sale:
It is always good for a company if it is growing its sales. It is also good from the customer’s point of view. Everybody would like to invest in such a company that is growing its business. The only thing that should be noted is the cause of that growth. Either it is due to the quality of the products or if it is just one-time growth due to an event. Like a sweets shop would sell more sweets on Halloween.
- Improvement margins:
If the company’s expense line is increasing faster, then this might be due to the new products launched or being launched by that company. It’s not a negative thing. When a company starts a new product, it has to pay expenses for research and development. Though it can be due to the poor management of expenses, you should look for that as well.
- Buyback the stock:
Usually, when a company is buying back the stocks, it’s a good sign. When a company thinks that its shares are undervalued, it starts to buy back its own shares. This shows the positive and active behavior of that company.
- Increase in Share count:
Usually when the share counts increase or a large number of investors buy a certain stock then that means it is a good place to invest but, you should be aware of the fact that the profit would be divided into all those shareholders and the average dividend would depend upon the number of shareholders. It is like dividing $100 among 2, they would get $50 each. If you divide it into four then they get $25 each.
Here are some tips to Buy the Best Shares:
- Do not invest money all of your capital in a single stock. Diversify your investments to minimize the risks.
- Although it’s better to diversify your investments, you should keep one company that has performed well over the years at a higher priority.
- Do not trust anybody advice until you are sure that what they are trying to say works. Free advice is there for you even from most credible people. But don’t trust unless you are not sure.