How to Find a Good Stock to Invest in

With an unstable economy it is more important than ever to diversify your investments and focus on long term survival. With the markets playing havoc, it presents an excellent opportunity to pick up some stocks at pennies on the dollar.

The question is: what stocks are best and how do you find a good stock to invest in. This article will give you some guidelines to follow. Two factors in what stock you will choose will be the investor personality and the average yield. Depending on the personality, you will be looking for a different yield.

Investor Personality Types

The key to determining your Investment Personality is to determine your level of risk tolerance. A risk tolerance is how much negative change an investor can handle in their individual portfolio value. The higher your risk tolerance, the more aggressive your personality. Three identifiable personality types are conservative, balanced, and aggressive. There are many resources online to help you determine your personality type.

Average Yield

Depending on your risk personality, you will choose stocks with a higher or lower yield. The yield is the percent of the stock that is paid back in dividends of some sort. A conservative investor will choose low yield stocks, which tend to be more stable, and the asset mix will include a lot of low yield treasury bonds. A balanced investor will look for yields in the 6-9% range, preferring a mix. An aggressive investor will pursue high yield, and highly volatile stocks and will have an portfolio average yield in the double digits.

Sector Overviews

There are a variety of sectors to invest in. In brief summary you have: Consumer Goods, which is anything that we would purchase, from appliances to clothing; Basic Materials, like steel, gold, oil; Financial, which includes banks, insurance companies, and income trusts; Healthcare, including drug manufacturers; Technology and it’s associated parts; Service, including retail, books, and things we use, similar to consumer goods; Utilities, like water and power; and Industrial Goods, like building and construction materials.

Each sector has it’s own top performers, and these are usually the dominant brands that you here, like Wal-Mart and Apple. Depending on your investment type, you may select the top performing stocks, or focus on the up and comers that could pay a higher dividend later on.

So to choose a stock, you need to figure out the personality type you are, choose a sector that interests you, and then make a list of stocks that pay yields in the range you are comfortable with. From there, choose the stocks that interest you the most.