Tips for Buying Stocks
with Confidence

1. Stay within your wheelhouse. For whatever reason, people are constantly buying shares in companies they've never heard of. I can't think of a crazier thing to do with your money. That's like giving a stranger a thousand bucks, asking for a yearly return, and not signing a contract. If you're going to invest in a company and stake your own money on that enterprise's success, don't you want to know what the company does? Better yet, don't you want to believe in the product that company sells? If there are items you constantly buy and use, you're probably a fan of whoever makes those products. I'd much rather you buy shares of a business you trust and understand than some highly-touted tech company which you have no idea about.

2. Balance creative thinking with controlled buying. To find good value you need to think about what markets, industries, and services are poised for growth. Once you have a sector in mind, consider the peripheral businesses and industries that influence the market in question. For example, if you're interested in electric cars, you might want to research businesses that manufacture innovative batteries. By finding smaller organizations that bigger companies depend on, you could discover an excellent business that's undervalued by the general public. If you're still investing in companies you trust, a little creative thinking can be a good way to diversify your portfolio without taking on too much risk.

3. Don't be afraid of a sale. The stock market is the one place where people don't seem to like a bargain. If the price drops on plane tickets, you rush to book a flight; when the asking price for a stock goes down, people run for the hills. If you have confidence in a particular company, buying after the stock price plunges can be a smart move, but be sure you have good reason to believe the company will recover from whatever caused the dip.