How do I Choose the Best Shares?

While there is no assured way to success in the stock market, strong investing strategies can help increase the likelihood of profitable returns. Choosing the best shares will depend on many factors, including the size of the investor's portfolio, the national and global economy, the recent history and forecast of the market, and the goals of the investor. Research is often key to choosing the best shares, though a little gambler's luck can also be in order.

Knowing the terminology is key to understanding how to choose the best shares. Any basic book on stock market investing is sure to carry glossaries and explanations of all the terms necessary to sound like a savvy investor. For novices, look for a book or Internet guide that is meant for beginners; advanced guides will often skip over simple terms and head into dizzying explanations of advanced trading concepts. Knowing the difference between a bear and a bull, a blue chip and a penny share, can provide the vocabulary necessary to at least understand the stock market conversation.

Determining an investing personality is an important part of choosing the best shares. Younger people with limited assets who want to save for retirement are going to choose different investing strategies than billionaires with money to burn on speculative markets. Companies with reliable returns are likely to have low risk, but cost more to buy; volatile businesses may have cheap shares, but can lead to significant losses if they fold. In order to determine which stocks to buy, it is important to take a careful personal inventory that includes what personal goals are, how much can be safely risked without endangering financial solvency, and how much stress and adrenaline can be managed on a daily basis.

Listening to market experts and financial advisers can sometimes help with choosing the best shares. Just like horse racing experts, these professionals are able to forecast the probability of winning stocks, but cannot guarantee against a long shot or unforeseen circumstances. Rather than taking the advice of one single TV or online expert as gospel truth, try checking out a few different market commentators to see where they agree and disagree.

Consider paying attention to investment ratings. Ratings agencies provide regularly updated company ratings based on past performance, debt-to-asset ratios, recent trends, and stability. Companies with high grades are considered relatively safe investments, while those with low grades are considered speculative investments. Look for companies that have shown some upward movement in recent ratings to identify shares that may be increasing in value, while still remaining relatively cheap.