Investing in the stock market can come down to one important thing: making good decisions. No matter how well we do our research, how often we buy and sell, or how much we pay experts for tips and advice, we won't be successful if we don't choose stocks that are good deals. Even though some people are good at figuring out where the market is going and when it will go up and down, they won't be able to make money if they don't buy the right stocks.
Because of this, some of the highest-paid people on Wall Street are known for their skill at picking stocks. Financial advisors give talks, write books, and send out newsletters about how to pick stocks that will do better than the market. Most experts agree that one of the best ways to judge a stock is to look at it from the consumer's point of view. We can often find information that even the most skilled and tech-savvy market watchers miss by using the instincts we've already learned as shoppers. While they study analytical charts, earnings reports, and the stock exchange ticker tape, people like you do business with the companies they invest in, because their experience as a customer says a lot about the value of the company and its products and services.
Here are some things to look for to figure out how much a company is worth:
- Are the workers happy with their jobs? One of the best ways to find out about a company is to talk to the people who work there. Many companies put on a good show, but there is often a lot of discontent going on behind the scenes. But it's a very good sign if employees like a company, especially if they like it enough to buy stock in it.
- Are they well-known? You might find a great new business with all the signs of success, only to find out that it's not very well known. Many small or local businesses are well-known in their own areas, but the rest of the world may not know about them yet. Investing in these unknown companies can be a great way to find the next hot stock. If the basics look good, being less well-known can be good for investors who want to get in at the start.
- If they went out of business, where would you go to find similar products and services? If you can't think of a good alternative, it's likely that the company is in a niche market that keeps customers coming back.
- How well-known is their item or service? If everyone you know uses it and is happy with things like price, customer service, and reliability, it's likely that the company is doing well among its competitors.
Shop around and pay attention to what you see and how you feel in each place. Then you should trust your gut. Make a list of the companies that interest you, then call their shareholder relations department to find out more. By starting your list with companies you already know, you increase the odds that you will make good decisions by a lot.
