Things You’ll Need:
Brokerage Accounts
Step 1:
Shop for undervalued companies.
Step 2:
Find stocks that have price-earnings ratios significantly lower than those of their peer group.
Step 3:
Watch for bad news. Wall Street often overreacts to bad news such as missed earnings, which will drive a stock lower than it should go.
Step 4:
Pick the jockey, not the horse. Find out who is running the company and where the executives worked previously.
Step 5:
Look for strong balance sheets. Companies with low debt loads, positive cash flow and consistently good earnings are good prospects.
Step 6:
Check out the portfolios of successful mutual-fund companies. If they are getting great returns year after year, they are holding stocks you might want to buy.
Step 7:
Know when to cut your losses. You want to invest for the long term, but you don't want to stick with a consistent loser.
Step 8:
Work hard. Do research. Read financial news. Study quarterly and annual reports as well as registration statements, looking for trends and opportunities.
Step 9:
Grill your broker. If the broker is recommending XYZ stock, ask for a detailed explanation, with an eye to growth prospects and historical performance.