Best Shares to Invest

Finding the best shares to invest in largely is a function of your personal investment goals. You might want to focus on equity growth or on generating income. Shares that are good candidates for the former are not typically good for the latter. To effectively choose the best shares to invest in you first need to identify what you want to accomplish. Next, study and research the market to find likely candidates. Even if you are a complete beginner to the world of share investing, you can learn how to become a profitable investor if you learn and practice some of the basic principals of investing in the share market.

Identify your investing goals

Prior to beginning your research for the best shares to buy and invest in, you need to identify what your goals as an investor are, other wise you really won’t be making wise decisions. An individual approaching retirement age typically wants lower-risk investments that provide good income. Younger share market investors are much more likely to want growth-oriented company shares that will increase in value. There are also higher-risk shares to buy, for those more adventurous investors, like green energy shares to buy and companies in other potentially high-growth industries which offer the possibility of high rates of return, however with greater risk as well.

Company research

A good way to find possible investments is by reading certain financial publications and trade journals for the specific industries you are interested in. A company’s main website can also be a good source of information; obviously it will be slightly biased however. Another good way to learn more about a company’s shares to invest in is by getting a copy of their annual report. Find out if the company’s revenue and earnings growth has been above average for its specific industry. Finding out of the company’s shares have consistently done as well or better than average for their specific industry as a whole over the last 3 to 5 years is also a good way to determine whether or not a company has hot shares to buy.

P/E ratio is important

Even assuming a company’s fundamentals are strong, you still want a good price when you are purchasing shares. Check out the price-earnings ratio (P/E) for the company you are interested in. Specifically you want to compare the PE ratio to other companies in the same industry as the shares you want to invest in. A high PE ratio might be an indicator that the shares are overvalued or that the company is expecting strong earnings growth. Alternatively, a low PE ratio can be an indication that that the shares are undervalued or possibly that there are signs of trouble within the company. Either way, if the PE ratio is significantly high or low compared to PE ratios of other companies in the same industry you should investigate further to find the reasons why prior to deciding to invest in shares of the company.

Income vs. Growth

Generally speaking, a company that provides a low-risk investment and that has a stable history of stock value and dividend payouts is what you want to find if you are more concerned with stability in your portfolio and are looking to earn income from the shares rather than high rates of return off company growth. For equity growth, you want to invest in the common stock of promising younger companies. Most of the increases in value for any growth-focused company will be in these types of securities. Starbucks (NASDAQ: SBUX), is a good example of this type of company, from the time of their IPO (initial public offering) in 1992 to the end of 2007, the coffee retailer grew from 165 stores to over 15,000 with plans of on-going expansion, especially in its international division. You can also choose smaller companies if you want to take on even more risk in return for substantially higher growth potential. The alternative green energy industry features some of these high-growth / possibly high risk  shares to buy.