Topic: How To Invest

Don’t overlook these 3 tips as you look for the best stocks

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When we select the best stocks for our newsletters and investment services, we use a number of different factors, of course. Below we examine three factors that can be easily overlooked by many investors.

When you use these tips wisely, they can give you a distinct advantage in spotting the best stocks for your portfolio.

  1. No stock can overcome a lack of integrity on the part of company insiders, no matter how undervalued or desirable it seems. If you have any doubts about the integrity of insiders, sell immediately. There are no limits to the ways in which unscrupulous operators can and will cheat you.

    However, in order to enhance your long-term returns and not just avoid loss, you should apply this tip in a moderate fashion. You must distinguish between lack of integrity on the one hand, and naivete or poor judgment on the other.

    Even the best stocks can run afoul of tax rules or regulatory decision from time to time. If you insist on treating every case as a sign of low integrity, you could wind up selling solid investments at market lows.

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  1. Look beyond share price movements. Share prices rise and fall based on a number of factors, including what’s going on in a company, its industry and the world. The best stocks do not always have the most attractive prices.

    A stock never gets so high that it can’t keep rising, nor so low that it can’t keep falling. That’s why you have to look beyond price changes when deciding when to buy or sell.
  2. Don’t focus too heavily on cutting costs: Cutting the costs of investing has an immediate, obvious benefit: it leaves you with more money. But some cost-cutting investment techniques can wind up costing you money in the long run.

    For example, some investors routinely refuse to pay the market price for stocks when they buy. They always put a bid in below the offer price, in hopes of buying the best stocks at a slightly better price. However, some of your best picks are going to go up as soon as you buy, and keep going up. Other investments will go down. If you always put in a bid below the current market price when you buy, you’ll filter out all your good investments. You’ll save a few cents from time to time. But you’ll always buy all your bad investment choices, and none of your good picks.

You can get our latest analysis, including our clear buy/sell/hold advice on dozens of Canadian stocks you may be considering buying in The Successful Investor. What’s more, you can get one month free when you subscribe today. Click here to learn how.

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