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Stock To Buy

Best Stock To Buy - How To Choose Them

Before investing in the stock market it is important to understand and know what you are doing and what you are getting into. Doing the necessary research will help you to avoid the common mistakes. One should have an exit plan before going ahead with the investment after considering all possible outcomes of that investment opportunity. Managing stocks after picking them is equally important as investing in them. Here are some pointers that will help you in choosing the right stock to buy.

52 is the number

Many stock brokers will suggest their clients to invest in companies where something good is brewing, profit-wise. Both the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) publish a 52-week high list which is a list of companies whose stock have been performing well over a period of time. It is recommended that investors refer to this list to pick companies to invest in. The stocks that appear on this list would have shown a positive momentum and there is every chance that the trend will continue.

Choose Diverse Stocks

It is recommended to invest in companies that belong to a diverse group of industries. Having stocks spread over different industries will reduce the risk factor and will even out any ups and downs, if there is anything in one particular industry that you have invested in.

Avoid Defensive Stocks

Defensive stocks, also known as Stodgy Stocks, are those which show very little movement irrespective of whether the market is performing good or bad and it is recommended to avoid investing in such stocks.

Say No to Takeover

It is suggested not to invest in stocks of companies that are possible takeover or merger targets. In such scenarios, the price of the stocks is driven by the possible buyout situation instead of the actual company's market value.

Analyze the charts

Before investing, one can take a look at the historical data with the help of charts and analyze the performance of the stock for the previous year or two to understand the trend. If the chart suggests high volatility trend, then it is better to keep away from investing in them.