How to Determine the Top Ten Stocks to Buy

When most think of investing in the stock market, they recall those stocks that made others rich. Most forget the stocks that decimated the wealth of others. That is why if an individual is going to invest in the stock market, it's not about "Buy and Hold" it is about "Buy and Homework." Before investing in the market, it's a good idea to determine the top ten stocks to buy based on solid research and homework.

Difficulty: Challenging

Instructions

1. Understand that the overall market does not necessarily influence individual stocks. Before a person makes a list of top ten stocks to buy it is important to examine each stock individually and not factor in any overall market conditions and apply them to the individual stocks. However, you can factor in the beta of each stock which measure how closely each stock will follow the market, but leave overall market conditions out of each stock analysis.

2. Determine your overall investment goals. For instance, the closer you are to retirement the less risk you want in the stocks you purchase. Conversely, if you are decades away from retirement you can choose stocks that carry more risk. In addition, some individuals may not be able to tolerate too much risk no matter what the age.

3. Diversify the list of ten stocks to buy. You should choose 5 different sectors you want to invest in and then select 2 stocks from each sector that best conform to your investment goals.

4. Find the projected growth and other financial measurements for each stock sector in which you can invest. Some examples of sectors are technology, energy, health care, communications, capital goods, and basic materials. See the resource section for more information.

5. Research the stocks within each sector to determine the best stock to buy given your individual investment requirements. Choose 5 stocks from each sector that, based on your investment criteria, you might invest in.

6. Compare each stock's performance and projections with the sector in which it resides. If the stock is below the projections, then eliminate that stock from the list.

7. Choose the top stocks from each sector. To diversify the list properly, you want to choose stocks from at least 3 sectors but preferably 5. There may not be any stock from that many sectors that you wish to buy, but realize that diversification is an important key in any investment list.

8. Finalize your list of the top ten stocks to buy based on your research and your investment goals.

Tips & Warnings

• Understand that investing in the stock market is rife with risk and if any investor is unsure or a novice he or she needs to contact an investment professional for guidance.