High dividend stocks assure stable returns even in a volatile market. However, companies declaring very high dividends from their profits are best avoided since they might not retain enough profits to invest in future growth and expansion plans. This, in turn, would limit the upside of stock prices. Companies that have unstable dividend policies are also unreliable since they may be declaring one-time dividends to gain investor interest.

Others say that one should not lose sight of fundamentals. Buy a stock based on its fundamentals and other qualitative factors. The price to earnings (PE) ratio is a good indicator of its value. Patil says one should also look at the price to book value (P BV) and price to sales (PS) ratios for comparison. A lower PBV signifies that the company is fundamentally weak. On the other hand, a lower PS ratio indicates that the stock is undervalued. Further, return on equity (ROE) indicates the amount of profit the company has generated with the shareholders' funds.