Finding The Best Stock Pick - How To Know The Best Stocks From The Bad Stocks. PDF Print E-mail
Written by Eric Stein   
Monday, 25 January 2010 18:17
It's difficult to imagine that twenty years ago there was no such thing as buying stocks online. Before the Internet, all you could do was to read the newspaper trying to get enough information and then phone your broker if you wanted to buy stocks.
by EricStein


It's difficult to imagine that twenty years ago there was no such thing as buying stocks online. Before the Internet, all you could do was to read the newspaper trying to get enough information and then phone your broker if you wanted to buy stocks.

The Internet changed the way we buy stocks forever. In the first place you can now buy stocks without ever picking up the phone. You can do it from the comfort of our living room at one of hundreds of online stock trading websites. There is still a broker involved, but you don't need to meet him or to get advice from him.

Not only did the way the actual buying or selling is carried out change, there were many other changes as well. Probably the single biggest change in the market was the incredible amount of information that became available to investors and traders since the Internet appeared on the scene.

No matter which stock you are interested in, you can now get a massive amount of information on that stock either for free or for a small fee. You can have the historical prices for the last ten years, projections of future prices, financial statements and as much analysis by experts as you could possibly need.

This drastic increase in information volumes can easily lead to information overload ' you can get to a point where it's simply too much to make sense of. That's when you need to lay down certain measurable criteria against which you measure different stocks before reaching a decision about them.

Never let the real reason for all your research slip your mind. You are looking for a stock that is undervalued. A stock which has huge growth potential and the market has not yet caught up to this.

One way of doing this is to compare the so-called P/E ratios of different shares to their future profitability expectations. Two companies might have the same price/earnings ratios, but one of them has a much higher level of profitability than the other. If this can realistically be expected to continue, the second one will make a much better investment than the first.

To find a clearly undervalued share in today's market is not easy and will take time. You will need to analyze a lot of company information and even ask questions at online investment forums before you can be sure you have found a good opportunity. Buying stocks online is easier than ever before, but that does not mean it should be done without first doing the necessary homework.

DISCLAIMER: This article is provided as information only and is not to be taken as financial advice.

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