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Wednesday 19 December 2012

How to select best stock to invest my hard earned money?



The following factors that you should look for, if you want to find the best stocks to invest in for better earnings. Do not follow any dumb rules than follow a procedural investment strategy.

Company Earning ==>This is the total income of the company through sales, including its profits and losses. Obviously, a company putting in consistent profits, quarter after quarter and year after year is a good choice to invest in. So the key is to spot the good performers, which doesn't necessitate any financial wizardry, but a thorough perusal of company reports!

Sales Revenue
==>This is the total revenue that a company has made through product sales in four quarters, that is one financial year. Good sales revenue is what makes the company's stock a safe option to invest in. Sales revenue indicates demand for the company product and gives you an idea of its market share. Greater the market share, the better it is!

Liquidity ==>The liquidity that is cash which the company is an important factor when you are thinking about investing in its stocks. Best stocks belong to companies with as much as 60% liquidity. By liquidity I mean hard cash and assets that can be easily liquefied. It is an indicator of solvency of the company and is a good reason to believe that the company is stable financially and therefore its stock is good enough for investment.

Total Valuation and P/E Ratio
==>The total valuation is the complete worth of the company. Best way to find the valuation of a company is the Price/Earnings that is P/E ratio, its stock has. It is an indicator of the amount of returns a company is giving against your investment in stock. If the P/E ratio lies between 5 and 50, then it is a good enough stock to invest.

Debt to Income Ratio ==>In the company performance report, look for the external debt the company has. If the company has a huge income including profit, but has high debts too, you know where the profit is going to go! So look for the debt/income ratio of the company. Lesser the debt, more financially stable the company is.

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