That is a very good question, and there is no easy answer, unfortunately. Everyone has their own opinion on which stocks to buy and how long to hold them.
- How long can you wait?
- How much risk can you afford?
- How many stocks can you afford?
Price, Risk & Timeline
On the other hand, if you want to take some risks and try some more volatile stocks you have a chance at making a larger and faster gain. A good example is to buy stock in Google.
Some of the riskiest stocks you can buy are Penny Stocks. They can give you the highest return (or loss!) in the shortest amount of time.
- Our Stock Screener
- Our Popular Stocks
- Our Top 500 Stocks
- Our Throw Darts at Stocks page
Diversification
The more stocks you purchase, the more safe you will be in case one stock drops significantly. Experts often recommend 30 to 100 different stocks but that is often not practical to do. Of course, you will probably also make less money because some stocks will go up and some will go down. You will probably also want to buy stocks from a few different industries so that you will be diversified in case one industry goes sour.
P/E Ratio
Many people like to use a company's P/E Ratio to determine whether it's a good buy or not.
The Price to Earnings (profit) Ratio can give you an indication of how high a stock's price is relative to how profitable it is. The best thing to do is to compare one company's PE to other companies in the same industry to see how high or low the price is. What can happen is many, many people can buy stock in a good company, which will cause the price to go much higher than it's really worth.
See an example of Microsoft's industry P/E ratios using Yahoo! Finance (scroll to the bottom).
Best Stocks to Buy
The best stocks to buy are the ones that fit your time frame and risk level. The "experts" in the stock market don't always have your best interests in mind so you may want to consider asking trusted friends and relatives if they know any good stocks to buy instead.
Buy Stock with our free Virtual Stock Exchange!