PostHeaderIcon Characteristics of a Good Stock

Stock trading can be a challenging way to invest your money in. It requires getting adept in knowing which stocks make good investments and which ones are not.

Considerable research is usually needed in place of gut feeling in order to succeed in this type of moneymaking venture. For some trading in stocks might be too risky a deal and quite an exciting challenge for the others.

One of the essential skills needed in stock investing is having that knack of finding a good stock. There are quite a lot of stocks out there to invest in.

But not all of them may give you a good return on your investment. When looking for good stocks to invest in, you should know how to look for certain characteristics that make up a good stock to invest in. here are some of them.

Product Appeal

Good stocks come from companies that create, produce or have something that people would want and need for years to come.

A good indicator of a good stock is if the business it engages in is something that creates a considerable demand from people for a long period of time.

A company with the hottest product today would not matter to a savvy stock investor if that demand is only for the short term. Success in stock investing would take you far if you try to look for stocks with such an appeal.

Competitive Advantage

You would usually find good stocks from companies that have established themselves and leading in their field or industry for quite a time. The reason why they are considered good stocks because such companies have been able to establish what is called a competitive advantage.

This competitive advantage can come in different aspects of the business. A great and established company may have a strong competitive advantage in a business where it takes quite a substantial amount to capital to start, such as in heavy manufacturing sector.

A competitive advantage may come in the form of a recognized brand or name which has become popular through the years. With these competitive advantages, it is usually hard for new competitors to get a share of the market. Thus, this advantage spell the difference for good stocks.

Market Leader

Another common characteristic of good stocks is that they come from a company considered as a leader in their filed or industry. But there is more to this. The better stocks come from those market leaders who try to set the pace and use their size and experience to protect their position. They try to set the agenda that the whole market and industry try to look up to.

There can also be market leaders that become complacent with their accomplishments and rest on their laurels. Sooner or later, these complacent companies may find themselves being bumped off the top position by an aggressive competitor, losing considerable stock value in the process.

You should try to beware of buying stocks from such companies as they may not be playing their advantages right.


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