Buying A Stock. Part 3


How do I find the right stock?

First, decide what you’re looking for. Do you want current income as well as the chance for price appreciation? Then find a solid dividend-paying stock such as a utility company, a real estate investment trust (REIT) or a household-name, blue-chip firm with a history of paying dividends. Ideally, you’d like a financially-strong stock yielding 3% or more (you determine a yield by dividing the dividend by the stock price). If you don’t care about current income but want a stock that could double your money in five years, you want a growth stock, one that has a good chance of boosting its profits by more than 12% a year. You’ll increase your odds of owning a winner if the company has a unique product or service, little or no debt.

You can research income stocks and growth stocks online (start with our Company Research tool) or in the public library, reading publications such as the Value Line Investment Survey or Standard & Poor’s Stock Guide. You might also want to buy a book dedicated to picking stocks wisely, like Michael Sivy’s Rules of Investing, The MotleyFool Investment Workbook or others mentioned in Good Books.

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