Deck Stock
How To Pick Common Stock - The Rules You Need To Know
Anybody that suggests that investing in the stock market is easy is probably trying to sell you something! The fact of the matter is, investing in the stock market is tough. Make just one or two wrong moves and if you're not careful you can wipe out years and years of careful savings and retirement safety in the blink of an eye.
But there are several things you can do to help stack the deck in your favor, and that's part of what I'm going to talk about in this article today. Mainly I'm going to focus on how to follow the rules for picking good common stocks.
The first rule is to try and buy the stock of a company that is a clear industry leader. If you can't afford the industry leader, at least try and get a hold of stock in a company that has a fairly important position within its specific industry.
The second rule is to try to find very specific industries that have limited amounts of competition. The less the competition the stronger the companies within that industry tend to be and the easier it is for them to make oversized profits year after year.
The third rule is to avoid industries, if at all possible, that are visible figures within the consumer price index or large players within a countries GDP, or gross domestic product. I'm talking about the auto industry, or the food industry, or the steel industry just to name a few.
These high profile industries are usually the first to go down during times of recession (by definition) and also are the companies that have a higher chance of being over regulated by the government. Over regulation almost always translates into lower profit and depressed stock prices.
The fourth rule is to look for companies that have a price to earnings ratio which is at least the same as or lower than the S&P 500 index's price-to-earnings ratio. Sure, you may have a difficult time finding these companies, but they're out there.
The fifth rule is to search for companies that have an extended history of paying out dividends, but not just paying them out; you are going to want to look for companies that have a history of increasing their dividends over time. Dividends are a very nice signal for stock price.
Finally, try to stay away from companies that are highly leveraged and hold a lot of debt on their balance sheet. Especially now in 2010, credit has dried up and the gravy train is over for many of these companies. Stock prices are beginning to reflect high debt burdens adversely so you're going to want to stay away from these types of highly leveraged companies if at all possible.
So there you have six easy-to-follow rules for picking the best common stocks. As with any investment decision, be sure to do your own research and fundamental analysis of the underlying company's performance before investing in any stock for the long run.
About the Author
Jason Markum has been writing articles online for almost 14 whole years. When not writing about investing, he enjoys running a portable work bench web site where he reviews the best industrial work bench for your work use.
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Whats the difficulty of attaching subs and an amp to a stock deck in my Jeep Commander?
I drive a 2006 Jeep Commander and would like to put in a system without taking out the stock deck as it is quite nice. I have 2 12" Pioneer's already in a box and a 2500 Watt Xtant amp. How hard would it be to hook them up to my stock deck? Anything helps, thanks
You dont need a new deck if you dont want one. You will need a high power level converter. Thats a little box that you splice into your speakers and it converts it into rca's some amps have this in them, jl audio and fusion to name to. If the amp has it you dont need the box. then you will have to run your remote cable to the fuse box and wire it onto something that turns on when you turn the car on.
But it would be easier if you got a new head unit.