How to Choose Stocks Wisely

Knowing how to choose stocks can make the difference between "playing the stock market" and real investing for your future. But sadly, most people do not know how to choose stocks to buy for their portfolios. That is fine if you have someone managing your assets for you (assuming they know what they are doing). But not everyone can afford the luxury of a financial planner.

What you really need is some good advice on stock market investing. That is, you need to educate yourself. And the best way to educate yourself about anything is to find a mentor. Someone who has been there, done that. And for stock market investments, that mentor is Benjamin Graham.

Not too long ago, Benjamin Graham was considered to be outdated. After all, he developed his methods of value investing in the 1930s.

Back then, people were recovering from the Depression. Using his formula for choosing stocks, investors did quite well for decades.

But in the boom of the 1990s, Graham's formula for evaluating stocks was considered too stringent. In fact, by his standards, practically none of the dotcom boom companies would have made the cut.

Fast forward to the year 2009. Many investors are revisiting Graham's timeless ideas. It turns out that for long term gains, value investing is the safest way to go.

In a preface to the revised edition of The Intelligent Investor by Benjamin Graham, Warren Buffet says it is, "By far the best book on investing ever written." That is quite an endorsement coming from one of the most successful investors of all time. (It is interesting to note that Warren Buffet did not buy into any dotcom securities, deeming them too risky).

Return from How to Choose Stocks to Beyond Budgeting