Traps to Avoid

1. Avoid listening to every guru’s every comment about every stock. There are the Cramers of the world, as well as many others on television or that write for large websites such as the Fool that don’t always get it right.
2. A stock is not a hot stock to buy just because the price has come crashing down. A stock that once traded at $50 a share, and is now at $10 a share, is not necessarily a bargain. It might not ever reach $50 again. In fact, it might not ever reach $15.
3. Just because everyone seems to be doing it, does not mean it is a hot stock to buy either. That often just leads to you being the last one to buy, and then the last one to sell. Not a position you want to find yourself in.
4. Make sure you don’t fall in love with a stock. It is easy to see a stock go against you, and refuse to drop it, thinking that it will eventually turn around. They don’t always eventually turn around.

How to Find Hot Stocks to Buy

1. Do you due diligence. Take the Warren Buffett approach and look for those stocks that are undervalued at the moment. These are the stocks that have a much higher chance at turning around in your favor.
2. Keep things in mind like dividends that are paid out to you. I always kind of feel like dividends are just ‘free money’. Hey, it makes me happy.
3. There are often newsletters with fantastic track records and proven success of hot stocks to buy. Those are the types you would want to be a part of. Even then, you would be wise to paper trade, or watch these stocks for a bit before using your hard earned money on them.

That’s not what I want to talk about here.

For some, that type of a long term play just isn’t what their adrenaline seems to be looking for. Luckily for them there are other options when deciding on how to buy stocks. Another trick up my sleeve is to use the price-to-earning ratio (P/E), and earnings per share (EPS). I can’t claim the invention of this method (Is there anything new under the sun?), but it is a sound one when looking for what stocks to buy for maximum growth.

The idea here is that you will take the P/E of the stock and then divide that by the EPS growth in percentage. These are numbers that should be readily available to you, so let me go through an example. If the P/E is 24 and the EPS is 16 you would get 1.5. Now, what does 1.5 mean? Here is sort of the rule of thumb when looking for the best stocks to buy: if the number you end up with is 0.65 or less (particularly 0.5 or less), you are looking at some good stocks to buy. Between 0.65 and 1.0, you should stay put, just keep an eye on that one. From 1.0 to 1.7 you should really consider that selling that stock, and any more than 1.7, a definite sell.

That right there is the simplicity of the system, in a nutshell. Again, I am not the inventor, but had first read about this years ago on the Fool, however some minor tweaks above were made by myself over time.

So there you have it. When you begin to look for what stocks to buy, you can come on back and see if this might be the system for you. Remember that there are many different ways of buying stock and many different great stocks to buy, but in the end it is money management that will make or break you. Be wise both in choosing which stocks to buy as well as how much and where you invest your money.

You know the types of companies I am talking about. I’m talking about AT&T, McDonald’s, Kraft Foods, just to name a few of the companies that would fit this criteria at the time of writing. Of course I’m not making a recommendation to go about and buy stock in these companies right off the bat, but if you have been asking yourself about the best stocks to buy now, these are types of companies that come to mind.

Slow but steady wins the race when it comes to investing in the stock market and planning for retirement over the long term, and buying stocks that pay a good dividend that you can reinvest into more shares of that stock goes nicely with this plan. It is easy to get caught up in the game of wanting to buy the next hot penny stock available, or trying to rich quick of the next IPO to come out, but a good steady, solid approach of investing in the above mentioned types of companies will do wonders for your portfolio of the long haul.

If possible my suggestion is for you to use a trading platform that will allow you to filter stocks according to the criteria mentioned above when you are looking for the best stock to buy, and find those dividend-paying stocks that seem to be trading at a price much less than what they should be worth right now. Remember that a good company’s stock price can fall simply because for whatever reason there are more people looking to sell that stock than buy it. These kind of stock blunders have a way of correcting themselves, as in the end the companies that people do want to be a part of, the best stock to buy, are from the good solid companies that for whatever reason might just be going through a bad lull in their company history.

It wasn’t my idea

I guess I can’t take credit for the idea then. But I don’t think Tim Hanson can either. I’m sure we are not the first people to come up with the idea of buying stock in companies that seem to be undervalued… isn’t that part of Warren Buffett’s mantra? And to buy stock in companies who give a nice quarterly dividend? Well, who wouldn’t think that some of the best stocks to buy are going to be those that, in addition to growing over time, again because they are undervalued, are also those that are going to give you a decent little chunk of change every quarter that you can withdraw, or preferably reinvest back into more shares of the same stock? It just makes sense.

Great stocks abound

The point here is that you can find good stocks to buy wherever you are looking. There are roughly 3000 dividend paying stocks in the stock market, so that gives you a large base from where you can begin to drill down and look to find those that are from the well established, yet undervalued companies that I was referring to. This to me is a much more sound plan for the long term than trying to get involved in what Is the latest best stock to buy, here today but gone tomorrow type of approach. This is the approach that gets you somewhere in ten years, twenty years, as opposed to only being able to look back and count your never ending per-trade fees because you thought you would day trade your way to millions in a couple of months.

Slow but steady wins the race when looking for good stocks to buy. A plan like the one above, executed over time is sure to increase your stock buying portfolio in ways you hadn’t imagined.

Free Penny Stock Picks

Of all the different ways to go about stock buying, some prefer to buy penny stocks simply because it is one of the best ways to see massive returns on your money in a very short time. Who can blame them? People often have the question of how to buy stock online or what are some really good stocks to buy. The answer to that question of course is going to vary widely with what it is you are looking to do. One who is looking to buy and hold stock for the long term, hoping to set up a nice little nest egg for their future should treat their investing a bit different than the person who is looking to make money quick through buying stocks online more aggressively. Again, massive amounts of money can be made in the stock market very quickly if you know what stocks to buy, and specifically what penny stocks to buy.

The key to this idea is to get in quickly, right before or as the bulls are taking over, and to then close your position just when you have hit your target. That can vary depending on your strategy, and of course if you are new to buying stock online you might want to start by learning from a more seasoned pro. They are out there, and they do make a lot of money in the stock market. Again, feel free to give James’ free penny stock picks a try. It is no strings attached, so you’ve got nothing to lose. Just promise you’ll come back and let me know how much you’ve made. Click here for the free penny stock picks.

Long term is a good phrase to end on when talking about the best stocks to buy, because that is what I focus on. Let me start by saying that what I do in no way resembles the idea of ‘day trading’ or the way some people will buy penny stocks in order to take quick advantage of small fluctuations in price. I am in this for the long-haul and want to buy stocks that are going to appreciate over time. In my opinion, these stocks are those that come from well established companies that for whatever reason, at the time of purchase are under-valued; trading for much less than I think the company is worth. Remember that a stock’s price will rise and fall in value NOT based on a company’s value or performance, but whether people are currently mostly buying or selling that stock. When people are very bearish on a stock that to me seems like a good company that is only going up and up, I feel I have a winner.

The answer to how to buy stocks lies not in ‘how’ so much as ‘when’. When I find a company like the ones mentioned above, I like to buy on dips. Those are the exact moments when I feel like the company is under-valued, and will continue to go up in price over time. The only other criterion I will really focus on is dividends. I like to see a company that will pay me a good dividend; one that I will reinvest of course, for further compounding effect. For me, that is all there is to stock buying. The question of what stocks to buy should really be what kind of stocks to buy, and that is my answer. I like to buy stocks online in this fashion for the simple reason that I can know that I am adding to my ever-increasing portfolio, from the comfort of my own home, and at a relatively good price, seeing as buying stocks online costs no more than a few dollars per trade.

Yes, that’s right, the internet. If you want to know how to buy stock, or know how but want to know what the best stocks to buy are, the internet can be your best friend. One of my favorite sites is the Motley Fool, which gives great advice on not only which stocks to buy, but also what sort of things to avoid when buying stocks online. You’ll even find the occasional interview with big guns such as Warren Buffett.

I won’t be putting any kind of a top 10 stocks to buy list right here, as a list like that would of course be both personal opinion, and ever-changing. What I will mention however, are a few of the things that go through my head when I am looking for good stocks to buy.

When I go to buy stock online, one of the first things that I will look for is a stock that is under-valued. Obviously I can’t stake claim to this idea, a lot of people look to do just that. The point to remember however, is that stock prices are not directly affected by how well a company is performing, or how good their outlook is. Stock prices are dictated by supply and demand, are there more people wanting to buy this stock, or sell it off? It just so happens that on occasion you can find more bears (people looking to sell), for whatever reason despite the fact that the company is a great one, with a bright future ahead. No one can predict the future of course, but that is one of the first things I will look at when considering what stock to buy.

My next move is that I will take this sort of ‘top stocks to buy’ list that I have created, from much research using the above tactic, and look for something very specific. I want to see a good dividend. That’s right, I want to see a company that pays good dividends, with the sole purpose of course of reinvesting those dividends right back into my portfolio. Many a millionaire has claimed that this at least in part is a reason to their success. Don’t ever underestimate the power of compounding your returns by reinvesting your dividends.

Lastly, I want to find those reputable companies that have stood the test of time. Although it works for some, I’m not looking to buy penny stocks, or for some guru’s latest ‘hot stocks to buy’ list. I want to buy stocks from the large companies that have been around, pay a good dividend, and will be around forever. Not every purchase of stock will be a long-term winner, let’s be honest. But this strategy is the one that I follow, and will continue to do so for as long as I plop down next to my computer with the question of what stocks to buy today.