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.

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.