What is the Best Stock to Invest In?

If you're like the majority of stock market investors you have struggled with finding the most effective stocks to invest in.

There are several approaches to find a very good stocks to invest in. But first you'll need to determine what method works best for you.

Basically you can find two main kinds of stock market investing 5 best ways to invest $5,000 in 2021.

1. Investing in growth stocks

2. Investing in value stocks

Growth stocks are companies which are growing fast in earnings. There are always a large amount of high tech and medical growth stocks.

Value stocks are stocks which are undervalued because they trade at a cheap set alongside the company's fundamentals (i.e. earnings, dividends, sales etc...)

Growth stocks generally will fatten your bank account faster but there is more risk whereas value stocks will generally grow at a slower more sustainable pace but probably won't offer you ulcers.

Here's what some investors look for in a growth stock (based on my understanding of the National Association of Investors Corporation (NAIC) criteria):

1. Strong Earnings Growth - either quarter to quarter or year over year

2. Strong Forward Earnings Growth - analysts estimate what earnings is likely to be for the next quarter or year, if they estimate growth that's a plus.

3. Profit margins - you'd prefer the organization to be making a large amount of profit to sustain further growth

4. Return On Equity (ROE) - look for growth in ROE or a well balanced ROE

5. Doubling in 5 years or less - you'd choose the stock to double in 5 years - look at what the analysts estimate for price potential.

Also here's what some value investors look for:

1. Shares price below intrinsic value

2. Low Price to Earnings (P/E) ratios

3. Price to Earnings Growth (PEG) ratio below 1 is good

4. Stock price is significantly less than tangible book value

5. A debt to equity ratio below 1

6. The company's assets should be more compared to the company's liabilities by at least a factor of 2

7. Dividend Yield within 1/3 of the amount of the AAA bond yield

8. Earnings growth of at least 7% per year for the past 10 years

You will find all sorts of different ways to find a very good stock to purchase but this would provide you with a starting point.