How to Find the Best Stocks to Invest In

Especially in the wake of the current recession, if you pick the correct stocks, you can make a lot of money in a short period of time. Finding the best stocks to invest in requires a little upfront research, but it can be done with the Internet and knowing a few terms.

Here's how to find the best stocks to invest in.

1. To find the best stocks to invest in, you must first learn the lingo of investment. A good program to watch is Mad Money with Jim Cramer on CNBC. WARNING: Do NOT take stock picks from this show. I like Jim Cramer only because he makes knowing the basics of picking stocks fun.

   The top 3 terms to know to find the best stocks to invest in -- Price/Earnings Ratio, Balance Sheet, Cash Flow.

2. After you learn the lingo, you must learn how to locate undervalued stocks. Undervalued stocks are best stocks to invest in, because the market will eventually catch up to the fact that the company is strong, and drive the stock price up.

   Find undervalued stocks by interpreting Cash Flow and Balance Sheets on Yahoo Finance. You want a low debt to income ratio, large cash reserves for research and development or buying capital goods, and steady dividend payouts, if the stock pays dividends.

3. Once you find undervalued stocks, watch the news to find the best stocks to invest in. But not mainstream news. Once news hits the mainstream, it's already factored into the stock price.

   Read the Wall Street Journal online before the market opens, ie, 4 or 5 AM Pacific Standard Time.

   Also take a look at the pre-market and aftermarket stock movement on Yahoo Finance or on TradingDay.com to find the best stocks to invest in.

4. Once you learn your way around pre and after market stock prices, short term news, and long term business fundamentals, you'll be in a good position to find the absolute best stocks to invest in. One last thing.

   Check your gut.

   Ideally, the best stocks to invest in are stocks that you know, in markets that you know. If you like wrestling, you should be checking WWE and seeing if the UFC is ever going to go public. If you're a construction worker, you should be checking Caterpillar, how it's expansion into China is going, and its competition. You will be able to better interpret the news, and that will lead to better stock picks. Good luck.