Every investor wants to know which are the best shares to buy today. There’s a big problem with that approach. The “best” is entirely dependent on any number of factors. Think of it this way. When you head to a car dealership in search of the best car, where do you go? First, you need to figure out what kind of car you want. Maybe you’re a sensible sedan type of person. Or you could be looking for a truck because you live around rugged terrain. Then there’s the dealership; some people like going to haggle in person while others are perfectly happy to take care of all the details online. Without even getting into things like price, financing, standard and optional features, color, and everything else, you can see how the “best” is subjective.
However, the best vehicles and dealerships will have some things in common. You can expect reliability, a good warranty, and honest service at a minimum. So like buying a car, establishing which are the best shares to buy today or tomorrow or anytime, is really about understanding what to look for in a company.
Let’s dive into some of the details before we get too far along. A stock is partial ownership in a particular company. Shares, on the other hand, can involve a variety of financial instruments that go beyond stocks. For instance, an investor can own shares of ETFs, mutual funds, or real estate investment trusts (REITs), among other investments.
Understanding the difference between common shares and preferred shares
There are two main types of shares to be aware of: common shares and preferred shares. Common shares are the standard stock issued by most companies. With a common share, the asset’s value can increase, and it may even pay dividends. Common shares often come with voting rights as well, giving the investor some amount of control over the business. Some common shares also have stipulations in place for ownership if the company issues new stock.
Preferred shares are a little different. A preferred share does not appreciate in value. It also does not come with voting rights. However, a preferred share specifies a regular dividend payment, which makes it less risky than common shares that do not guarantee a dividend. Stockholders with preferred shares are also prioritized over common shareholders.
It’s important to know which type of share you’re buying, so you understand their rights associated with the holding.
Characteristics of the best shares to buy today
The best shares to buy today will give you a reason to hold onto the investment for tomorrow and beyond. Many of the top stocks come from well-established companies with a history of success. These companies may be household names with strong brand recognition. They will often be positioned in thriving industries with strong business growth potential. A history of paying dividends is another characteristic of the best shares to buy today.
Additionally, look for companies with a strong balance sheet and appropriate cash flow. Businesses that are growing are good targets, especially when they are in healthy industries, involve new technology, or have promising research and development budgets. These characteristics can help your portfolio deal with market downturns.
Another element to look for includes hidden assets. Stock with hidden assets might be undervalued, and its price may go up significantly once those assets are recognized. An example of a hidden asset can be real estate that a company owns. A hidden asset, by definition, does not impact the stock’s current price, but once the asset is realized, it will often lead to the stock price to increase.
Diversify the shares you hold
Be sure to spread your stock holdings out among the main industry sectors. This will help protect your investments if there are movements within the market. If one market sector drops significantly, you will be safeguarded by having money in other investment sectors that are not being impacted.
How do you find the best shares for your diversified portfolio?