Today, more people than ever own stocks, either directly or through mutual funds.

Financial indices are the main ingredients of any stock selection process, but keep in mind that there is no single financial index or statistic that, when isolated, provides a greater likelihood of outperforming the stock market. When a single measure is used to find stocks to invest, the output is likely to be stocks concentrated in one industry. The goal of any security selection system should be to combine financial and statistical ratios in a way that mitigates the weaknesses of individual factors and combines them to form a quality list of potential equity investments.

The number of components in your stock selection process can be endless when looking for winning stocks. Some of the criteria may appear in multiple categories. The best stocks search process applies filters on different layers to focus on stocks that meet your investment criteria.

Universe

The initial criterion is the universe of actions that includes the industry, sub-industry and the grouping of the actions to be filtered. Some investors like to focus on companies in a certain type of business. Where returns can be more stable or predictable. In certain industries, some financial measures are emphasized. Dividend yields can be more important for utilities and real estate than for information technology companies.

Stock data

Stock data includes measures such as price, volume, stock float, short-term interest rate, and market capitalization.

Stock performance

The performance of the stock will illustrate how the stock performed over different time periods and measures the level of risk.

Sales and profitability

Sales and profitability will determine the actual performance of the company. Historically, stocks that perform well will have increasing sales revenue.

Liquidity

The liquidity ratios will emphasize the cash position of the company. Stronger ratios can mean less debt, with more cash available to grow the business through acquisitions or finance capital improvements.

Valuation ratios

The most followed relationship is the price / earnings ratio. Valuation ratios can be used as an indication of how the share price compares to other financial components. All ratios have the stock price or a component of the stock as a numerator to indicate whether the stock is valued correctly.

Growth rates

Growth rates can indicate those components that are expected to increase in the future. The growth rates of some financial measures are useful in determining whether the company is being valued properly. There are also a few diverse factors that can be used to find suitable stocks to invest in. Analyst coverage, institutional and privileged ownership, and debt ratings can all indicate the health and stability of the business.

Before making any investment in stocks, you should have a clear idea of ​​what the money will be used for in the future, as this will help shape the choice of investment vehicle. A self-assessment will determine your tolerance for risk and when the money will be needed. Your stock selection process may eventually reduce the need for a broker or financial advisor and allow you to find the best stocks based on selected criteria, hold them, or sell them.

Finding stocks to invest in is not a complicated process. It helps to have a basic understanding of investment terms. the most important feature in the selection; the process is to first know yourself and what you are looking for when buying stocks