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.

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.

One of the questions that might be going through your head is why you would want to buy stocks online in the first place. Simplicity is probably the best answer to that. As opposed to old school idea of having to call up your broker, figure out the price of a stock, somehow also figure out where it has been historically, this can all be done now from your own computer with ease. Buying stocks online is the easiest way to begin to shape your stock portfolio into what you want it to be.

If you aren’t sure exactly how to buy stocks online, I by that I mean what stocks to buy; whether you should buy and hold or buy penny stocks, or what, allow me to make a suggestion. On a day to day basis the stock market can be brutal; it can be your worst enemy. Despite that, over time the stock market has historically gone up and up, and I believe it will continue to do that over the long haul. Approach your stock buying as what it should be: a long term approach to acquiring wealth.

The answer to ‘how to buy stock online’ has always been that. Slow but steady does win the race in this game, as it is something that needs to be approached with caution. Do your due diligence when buying stock online and looking for good stocks to buy. Those stocks that are going to add to your income are out there, but they must be searched for like diamonds in the rough. The best stock to buy might not always be the latest one that the latest guru is trying to promote. Research and learn about the company behind the stock. Do you feel that it is a good company, whose stock price is simply undervalued at the moment? Those are the kind of companies you want to invest in and be a part of.

There of course are different ways to go about stock buying, depending on a number of factors. Not the least of which might be your age. The mantra I have always heard and lived by is to invest in more ‘risky’ investments using your age as the percentage that represents the more ‘conservative’ part of your portfolio. So if you are 40 years old, this idea would state that you should have 40% of your portfolio in more conservative investments, and 60% in riskier investments. I’ll leave determining what is conservative and what is risky up to you and your financial planner, but suffice it to say, it might be a good thing to think about when determining what stocks to buy, and how to buy stock in general.

Buying stocks can be done many ways, but quickly increasing in popularity is the idea that you can buy stocks online. This is done through an online broker where you set up a trading account, fund it with your desired amount of money, and can instantly begin buying and selling stocks at will. I wouldn’t use the ease with which you can buy stock trick you into buying every new IPO or to make you buy penny stocks on a whim. Even though it is cheap to buy stock online remember that your money is at risk with every trade that you place, so it must be done prudently. Buying stocks for the long term, from good reputable company is a far better option than looking to buy stocks off of some ‘good stocks to buy’ list of the day.

Stock buying in my opinion is still one of the last ways that the little guy can get ahead. Through prudent market research, watching companies and stock prices as they rise and fall, you can essentially buy-in and own a portion of some of the greatest companies this world has to offer. That is not something that should be taken lightly, but definitely something that every person who has considered the idea of buying stocks should do.

So, how to buy stocks online? The first thing you will need to do is open a stock trading account with the online broker of your choice. There are quite a few reputable companies out there, but suggestion is to do a simple Google search, and find reviews on the many different online brokers available to you, and see what the people in the trenches are saying about their brokers right now. Buying stocks should be a good experience, but with the wrong broker it can be far from it.

When you have set up with your online broker of choice, you will need to fund your account with money. Different brokers will allow you to fund in different ways, and also have different minimums that you will have to fund your account with. Those would be just a few of things that you would want to look at before opening an account with an online broker. When you do, you will be set up with what is called a trading platform. That is how to buy stock online. Stock buying using a trading platform is simple, and really just a matter of point and click. There might be a bit more to it, but the best way to figure it out is to play around with the platform. I wouldn’t do this using your hard-earned money, however. Most places will allow you to open a dummy account, in other words, an account with $50,000 in fake money so that you can practice buying stocks online without any risk to your capital.

How to buy stocks doesn’t need to be a difficult question to answer, the real question lies in what are the best stocks to buy, once you set up online. Good stocks to buy abound, but you will need to be looking in the right places. I would typically avoid the hot trends of looking for penny stocks to buy, and other more risky moves, and sticking with reputable, long-term companies that pay dividends when you are looking for the best stock to buy for your personal portfolio, and especially so if you are just starting out. There are countless places online that give good, sound advice on what stocks to buy, based on years of cumulative experience between many different professionals. Keep things simple and realize that you are in the game for the long-term, and your chances of coming out fine greatly increase.

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.