InvestorQ : Are there are any rules for me to select stocks to buy?
shrinidhi Rajan made post

Are there are any rules for me to select stocks to buy?

Answer
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Priyanka N answered.
2 years ago


With so many options available, picking the right stock for your portfolio can be a challenge. The basic rule while buying stock is to keep your financial goals in mind. When you look at a stock, first ask yourself a simple question; does it fit into my long-term goals? Some may look for growth, while some may look for dividend income. The next logical step is to conduct a stock research. Look at the company's income statement, cash flow statement, balance sheet, management's future plans, debt figures, etc. Once you've accumulated the facts, analyse the data. If the EPS (earnings per share) is good, it means that the company is making profit on a per-share basis. The market appreciates stocks which show a growth trend of EPS. You can also use a screener to narrow down the list of stocks based on any criteria like industry or sector.
Don’t just look at numbers. Also look at qualitative factors like pedigree of the company, management, corporate governance etc. Avoid small-cap companies and go in for mid-cap and large-cap ones. The only problem with small caps is that little is known about them and also they are too vulnerable to shocks. You can also conduct a technical analysis using the tools and charts available online. Getting back to our first point; whatever stock you buy ensure that you do not diverge from your basic goals as it will be tantamount to random investing.