No Crystal Ball Needed: Pointers for Picking the Best Stocks to Buy
by Mashum Mollah Marketing Published on: 06 January 2017 Last Updated on: 08 November 2024
The greatest challenge of playing the stock market is knowing which stocks to buy. Before you invest in stocks, it’s important that you do some research. You’d be surprised to know that some people don’t consider their decisions carefully before investing. Sadly, they often pay for this down the road when their markets crash. Here are some insights on how to pick the right investments.
Research the company:
Take a long hard look at any company you’re considering investing in. If you don’t understand what the company is doing or how it is operating, don’t invest in it. The first place to look for vital information is the company’s website. You can also contact them for more information on their products, services, and budget.
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Find out if the company makes a profit:
There’s little value in investing in a company that’s running at a loss. The best way to examine the company’s earnings is to take a look at the quarterly and annual earnings reports. These will show you the company’s net income in dollars and share earnings.
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Look at the earnings history and outlook:
The best way to get a handle on this is to search through the company’s past quarterly statements. You can also find out a lot from previous news stories and company press releases. You need to know if the enterprise has a history of stable earnings growth.
Check out the values of the stock:
Determine the company’s valuation. You will need to research price to sales and price to earnings. You can easily find this information online.
Check out the competition:
No matter what industry or service you are investing in, every company has competitors. As an investor, you need to know where your company stands in the pecking order. Find out if the company you are considering has a larger market share than its competitors. If it’s a small or relatively new company, is its growth accelerating in its niche? Don’t forget to examine foreign competitors.
Look at the company executives:
As an independent investor, you’ll have to rely on your own research to find out who’s running the company. Look at their track record, their experience in the industry and their history with the company.
Read the balance sheet:
If you are seriously considering a long-term investment in a company, you will need to check and see if their balance sheet is clean. Check out the debt to earning ratio. It’s also pertinent to find out about the company’s inventory levels and how much they invest in research and development.
Read the company’s annual reports:
These will tell you a lot about the company’s earnings and expenditure. The K-10 is a detailed annual report. The 10-Q is similar but filed on a quarterly basis.
Track any red flags:
If you’ve already read the quarterly and annual reports, you will already be aware of the company’s risk factors and their accounting practices. Use this information to assess if whether the company is becoming too aggressive or not.
When you’ve invested your money, it’s important to check your stocks on a regular basis, that way you will always be up to speed on your stock’s price movements. If your portfolio is not set up through a brokerage account, there are several online options for free customizable trackers you can use to keep an eye on your stock holdings.
Remember, when you’re investing in the stock market, there’s no shortcut to making money, but if you do your research your efforts will be rewarded. Think about why you’re investing and what your financial goals are. Do you want to make your money within a few months? Are you investing for college fees or retirement? Bear in mind, because the stock market is volatile, there is no guarantee you will get your dividends when you want them.
Generally, the growth of your portfolio is dependent on three main factors:
- The amount of money you invest.
- The number of annual gains on your investment.
- The term of your investment.
Preferably, you should start investing as early as possible. If you ask any seasoned investor, he or she will recommend diversifying. Wise investors buy stocks in a variety of industries, sometimes even in different countries. This means that a single bad economic event will not affect all your investments to the same degree.
The sooner you begin your investments, the longer you will have to reap the profits. Just remember to do your homework before you begin.
Anna Herbert learned about stocks and shares from a young age thanks to her Grandfather. Now an investment banker, Anna shares her knowledge with those who are interested but not quite sure about stepping into the stock market world.
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