Figuring out what stocks to invest in can be one of the most fun parts of investing, but also one of the most challenging. With thousands of companies to choose from, how do you decide which stocks are right for your portfolio?
In this guide, we’ll highlight 7 ways you can find stocks to invest in.
Before You Start: Define Your Investment Goals
Before we dive into the top ways to find stocks, it’s important to define your investment goals. How long you plan to invest for, how much risk tolerance you have, and your reason for investing in the first place can all impact which stocks are right for you. Think carefully about what types of stocks and investing strategies will help you achieve your goal and focus on those.
How to Find Stocks to Invest In
Once you’re clear about your investing goals, it’s time to start looking for stocks. Here are 7 ways you can find stocks to invest in.
1. Invest in What You Know
The best place for many investors to start is to think about companies and industries you know. Create a list of companies that you like or already buy products from and use that list as a springboard for further research. You can get even more specific by focusing in on a particular industry and thinking about what companies within that industry you like the most.
You can also use your work or educational background to your advantage. For example, if you have a degree in biology, you could focus on biotechnology companies.
2. Pay Attention to Trends
Stocks often rise and fall in response to short-term trends, but it’s long-term trends that define the market’s winners and losers for years to come. For example, when eCommerce was a relatively new trend, investors who recognized the potential of this new mode of shopping were able to get in early on companies like Amazon and Shopify. Cryptocurrency, too, initially looked like a fad but has proven to be a lasting trend.
Trends are often obvious in retrospect, but it can be hard to know what will last in the moment. Keep an eye on things like social media to see what topics are able to hold attention over many months. Research reports from professional analysts can also be a valuable source of information about long-term trends.
3. Sign up for a Stock Picking Newsletter
Stock picking newsletters offer a simple way to invest. Instead of finding stocks to invest in on your own, they’re presented to you along with a rationale for the pick.
There are dozens of different stock-picking newsletters, so it’s important to choose one that matches your investing style. One of the most popular is the Motley Fool Stock Advisor, which offers two picks per month and has returned over 550% since its inception in 2002. The service charges $199 per year, but new members can get their first year for $89.
While you can simply follow a newsletter’s picks, these services can also be a springboard for your own ideas. You might invest in both the pick itself and a competitor, for example, or use the research into the stock that’s presented to look more deeply at a market trend.
4. Read Financial News
Financial news is one of the best sources of information available to investors. You not only get day-to-day coverage of the market – which offers explanations for why stocks are rising and falling – but also in-depth analysis into individual companies and sectors. Staying current with this news can help you gauge the health of specific stocks as well as identify potential areas for further research.
Popular financial news services include CNBC, Yahoo! Finance, MarketWatch, and Benzinga. CNBC and Yahoo! Finance each provide a broad overview of the market, while MarketWatch offers a more detailed analysis of individual stocks. Benzinga offers a mix of up-to-the-minute market news stories and long-term investment ideas.
5. Utilize Stock Screeners
A stock screener can help you take a broad investment idea and find specific stocks that fit your thesis. The trick to using a stock screener successfully is to translate your idea into a set of parameters. In general, it’s better to be a little bit broad when creating screener filters so that you don’t miss out on stocks that are potentially a fit.
One of the best stock screeners to use for this purpose is Finviz. It offers hundreds of different parameters for both fundamental and technical analysis, so it’s flexible enough to work for a wide range of investment strategies. Finviz also enables you to save screen results to a custom portfolio, making it easy to follow up on potential matches.
6. Choose the Best Dividend Stocks
Dividend stocks aren’t just for income investors. They can offer steady cash flow and lower volatility for any portfolio. So, even if your investing strategy isn’t strictly built around dividend stocks, they could be worth a look.
Our favorite service for finding top dividend stocks is Dividend.com. With a Premium membership ($149 per year), you can see the top 20 dividend stocks hand-picked by the platform’s analysts. Even without a paid membership, Dividend.com offers information about top dividend stocks by sector and a screener to help you sort dividend stocks. If you already have a stock in mind, Dividend.com also offers detailed profiles that include data about a company’s payout history.
7. Choose the Best ETFs
ETFs can allow you to invest in a whole market sector or a specific theme. So, you can invest in investment ideas and strategies – like renewable energy growth or low volatility – instead of individual stocks. For many investors, that takes some of the pressure out of the process of finding stocks and makes it easier to build a diversified portfolio.
One of the best tools for finding ETFs is ETFdb.com, which serves as an online directory for thousands of ETFs. The site segments ETFs into themes to make it easier to find funds that fit your investment thesis, and there’s a fund screener you can use to sort funds based on performance, holdings, and more. Most of ETFdb.com’s features are free to access, although you can get even more detailed fund information with a Pro account ($199 per year).
There are many different ways to find stocks to invest in, and which ones are right for you will depend in large part on your investing goals and style. You can use several of the methods above in combination to cast a wide net and then focus on the most promising candidates. Always be sure to follow up your initial search with careful research to determine whether a stock is truly worth investing in.