What's the best way to learn which companies to invest in?

Question

Hello, I am a teen who is interested in investing,
I know some about HOW to get shares, but my question is what's the best way to be knowledgeable about which companies it will be wise to invest in?
Thanks,
Jack

Answer 1

I actually would not invest in individual companies. In my opinion, the easiest way to invest is through mutual funds or exchange traded funds (ETFs).

When you buy a mutual fund, you are likely getting dozens of companies within it, and you will profit when the general market rises.

Trying to pick one stock is risky, because if you are wrong, you can easily lose all your money if the company goes out of business. With mutuals funds, it is highly unlikely that all the comanies within the fund will go under.

Answer 2

That is a question that is really not easy to answer. There are a lot of books available that attempt to provide an answer to this question. Some are a little bit helpful but many are not. There are so many different approaches to choosing which companies to invest in that I have lost count a long time ago. Currently there are broadly about a dozen main approaches. 1. technical approach. The theory here is that the action of the stock will tell you whether it is a good investment or not. You look at the chart pattern of the stock and make a decision based on that. There are probably 50 books available telling you how to interpret these chart patterns. 2. fundamental approach. This theory is that you need to evaluate the balance sheet, income statment, and miriad other data to determine whether the company is a good investment or not. 3. growth stock approach. This theory is that growth stocks will offer the best returns. This was/is very popular with certain investors. A bunch of them lost their shirts though when the growth stock euphoria got out of hand in the late 90s and then collapsed in 2001. 4. small cap stock approach. This is really a sub set of the growth stock approach. The theory here is that small companies tend to grow faster than large companies which really have a very difficult time growing faster than the economy because they are the economy. With this approach one must really do ones homework very carefully because small cap stocks also tend to go bust much more quickly than large cap stocks. 5. developing market approach. This is also a growth stock strategy but more specialized. The theory here is that countries like China and India are growthing 4x as fast as developed economies so by investing in companies there the expected returns should be also 4x those of the developed economies. 6. contrarian approach. This one is for risk takers but can offer huge rewards. The theory here is that by buying stock of companies that are doing very poorly, when they turn around you will reap a fortune.

I am getting tired of typing. There are a lot more to think about also.

Answer 3

I like using yahoo finance because there is no charge ,
They have a good investing education section and
If you type the symbol of a stock your interested in ,
It brings up a quote with other useful links .
There is a chart option where you can see past performances and
There is 'key statistics' links .
That shows not only their revenue but if revenue is growing or declining by giving a + or - % .
Also shows how much debt they are carrying and I divide their debt by their revenue . If they have debt that is more than 50% of their revenue , I am cautious .

http://finance.yahoo.com/

http://finance.yahoo.com/education

and an example of a chart for apple with the extra links like key stats . . .

http://finance.yahoo.com/q?s=aapl

ALSO : Avoid putting more than 10% of your $$$$ in any one investment as this is very risky . All companies have "corrections" and if a lot of your $$$ is tied up there , it can't be used or would be totally lost during a correction .

So look up the PWR and you find they do have 8% revenue growth and their debt to revenue is about 20% . Their current price however is a lot higher than the recommended 20 times earnings ( the P/E ) ,
It is almost 70 ! That is considered too high , and some would recommend waiting for a pull back .

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Answer 4

The only thing you have to do is do your homework and choose stocks wisely.
Look for 1) strong sales numbers
2) Strong earnings year over year and Quar over Quar
and 3) look for a solid management team.

I will start you out with a winner. Invest at least half of your money in Quantas Services (PWR).
This company is a winner through and through. They build company infrastructures and networks. When Katrina hit, they got bid to help rebuild that area. With the new construction numbers now out, construction spending will be very high over the next year.
The stock has moved upward over the past year from $22 to $30 and I expect PWR to cross the $40/share barrier by the end of this year. This is a solid stock to build your portfolio around...Good luck and make lot$ of money!