4 Questions to Ask When You're Picking Stocks to Buy

Investing in stocks is one of the better ways to help you achieve your financial goals. However, with over 200 companies to choose from, it's not always easy to pick which ones will outperform the others in the long run.

Before investing your money into a company, here are four questions you should ask when choosing a stock:

1. Is the company profitable over the long term?

One indicator of a company's quality is if it's profitable over the years, not just in the most recent quarter. Steadily increasing earnings can be a good sign that a company has good fundamentals, making it an important factor to look into when looking for a stock to invest in.

2. Is it in an industry that’s doing well?

The industry a company is in is often an important factor in determining its potential performance. If an industry is performing well, chances are, it can create positive sentiment and attract investor interest for all of the stocks within that sector, since those companies tend to go through the same economic and market conditions.

On the other hand, even if a company is fundamentally sound, but the industry and the business it's in is suffering, the stock may also suffer.

3. Is the company run by a good and trustworthy management team?

A trustworthy management team instills confidence in its investors and shareholders. Investors can rest easy knowing their hard-earned money is invested in a company that has a transparent and reliable leadership. Having a trustworthy management team also increases the likelihood of delivering consistent financial performance, adhering to corporate governance practices, and providing accurate and timely information to investors.

4. Is there a high or steady demand for their products & services?

Companies that have high demand for their products often generate significant revenue and profit. A strong customer demand is a good sign that the company's products or services are well-received in the market, which can lead to increased sales, stability, and financial success.

Conclusion

By having these criteria in mind, you can choose quality companies for long-term success in the stock market. To help you in choosing stocks, you can check out Chief Equity Strategist April Tan’s monthly COLing the Shots report where she handpicks the stocks she thinks will outperform the market. You can also check out our Research team’s Investment Guide in the COL website (Research tab > Fundamentals > Investment Guide) for an expanded list of good quality companies to invest in.