- 1). Identify an industry or market that you are familiar with or know something about. With foreknowledge of a market or sector, you don't have to spend time learning the market.
- 2). Research companies within the market or industry and ascertain which companies demonstrate solid business fundamentals but may have undervalued stock. What this means is finding a company that promotes an effective and sound management style, shows consistent profits, potential for sales growth and industry advancement with a lower stock value than other comparative companies.
- 3). Look for companies that ride under the radar or may not be that popular. Popular stocks tend to have an overall higher-priced stock value, while not-so-popular companies may have an undervalued stock.
- 4). Evaluate a company's future prospects. If the company has a stable growth trend over several years and its outcome looks good for future growth--and the above criteria are met--this might be a good stock purchase to consider.
- 5). Avoid companies engulfed in legal battles or that receive negative media attention. Companies currently in the news for problems or other legal hassles can experience a rapid stock plunge. Companies involved in litigation that lasts for years will impact its stock over time.
- 6). Locate a brokerage firm. A brokerage is a firm that is a member of a stock exchange and can trade stocks within it. Brokers execute your orders to buy or sell particular stocks, oftentimes through an online secure trading platform. A broker should have a good reputation and at the same time offer competitive rates or low commissions. Check a broker's standing with the U.S. Securities and Exchange Commission.
- 7). Instruct your broker to buy the stocks previously identified. Determine an investment strategy--whether you are in for the quick profit or long-term growth potential of the stock. Remember that stocks may go down as well as up, so do not put all your savings in stocks, as it may be risky. It is important to diversify investments.
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