What shares should I buy?

After making the decision to become involved in the stock market, naturally the next question that one might find themselves asking is ‘What shares should I buy?’

Unfortunately, there is no easy answer to this question as a lot will depend upon things that you might not have given much thought to or, in fact, you don’t even yet know about yourself as an investor.

For example, what is your tolerance to risk? Are you looking for relatively low risk, stable, blue-chip shares, or, are you looking for high growth, speculative stocks? Furthermore, what are your financial objectives? Are you concerned primarily with capital growth, or, are you looking to provide yourself with an income stream by way of dividends?

As tough as these questions may be for the new market participant, there are some obvious things that you already know clearly about yourself that can give you advantage when asking yourself ‘What shares should I buy?’

First and foremost is your area of expertise, namely, your job. Let’s look at some examples to explain this further.

If you are a health professional, you will likely have some insight into how health companies operate, and the factors that might influence their profit and loss.

If you are a chemist, no doubt you would have some idea of the medications that fulfil their stated objectives and the companies that produce them.

If you are an advertising executive, you would have insight as to the amount of money companies are spending on their advertising campaigns, which may give an idea as to their sales and revenue.

This list could go on and on and on, and just about every job out there will provide insight into a particular industry that only the employees of that industry will have knowledge of. As simple as this may sound, it can provide you with an advantage when it comes to deciding which shares to buy.

Another part of who you are can provide you with an advantage, namely, your interests. This is similar to what has been outlined above, but can provide a slightly different insight.

For example, if you love playing video games then you will know which games you and your mates are buying and will be able to tack gaming trends just as well as an industry analyst.

For the women out there, if you love shopping then you would have the inside running on the biggest and most popular fashion brands and perhaps some insight into consumer spending patterns.

The key to all of this is to think outside the box when it comes to relating your education, personal experiences, and work history to your potential investments.

Once you have considered the type of stocks you might like to invest in, you can then conduct research in those areas. Although relating your experiences to your investments can be a useful starting point in determining which stocks you might like to purchase, there is more that goes into a profitable investment.

Once a list of stocks and/or sectors has been developed, analysing company documents such as balance sheets and income statements is the next step in successful investing.

Any stocks that make the cut can then be filtered for other qualities such as an attractive stock price, shareholder-friendly management, and a solid plan for managing future growth.