What's the Best Stock to Spend In?

If you're like the majority of stock market investors you have struggled with finding the most effective stocks to invest in.

There are several ways to find the best stocks to invest in. But first you will need to decide what method is most effective for you.

Basically there are two main types of stock market investing how can i start investing with 5000 dollars?

1. Investing in growth stocks

2. Investing in value stocks

Growth stocks are companies that are growing fast in earnings. There are always a large amount of hi-tech and medical growth stocks.

Value stocks are stocks that are undervalued since they trade at a lower price compared to the company's fundamentals (i.e. earnings, dividends, sales etc...)

Growth stocks generally will fatten your bank account faster but there is more risk whereas value stocks will generally grow at a slower more sustainable pace but probably won't give you ulcers.

Here's what some investors look for in a growth stock (based on my understanding of the National Association of Investors Corporation (NAIC) criteria):

1. Strong Earnings Growth - either quarter to quarter or year over year

2. Strong Forward Earnings Growth - analysts estimate what earnings will undoubtedly be for the following quarter or year, if they estimate growth that's a plus.

3. Profit margins - you'd prefer the organization to be making a large amount of profit to sustain further growth

4. Return On Equity (ROE) - look for growth in ROE or a stable ROE

5. Doubling in 5 years or less - you'd prefer the stock to double in 5 years - look at what the analysts estimate for price potential.

Also here's what some value investors look for:

1. Shares price below intrinsic value

2. Low Price to Earnings (P/E) ratios

3. Price to Earnings Growth (PEG) ratio below 1 is good

4. Stock price is significantly less than tangible book value

5. A debt to equity ratio below 1

6. The company's assets should be much more compared to the company's liabilities by at the least one factor of 2

7. Dividend Yield within 1/3 of the quantity of the AAA bond yield

8. Earnings growth of at the least 7% per year for yesteryear 10 years

You will find a number of other ways to find the best stock to purchase but this will provide you with a starting point.