Choosing or picking of stock is not easy, as we know stock trading is unpredictable.
Choosing a trading stock is depend upon various factor like level of experience , how much money or capital you want to invest, which company you want to invest, what type of trading you want to start like Intraday trading, positional or holding trading.
If you are beginner then it is very risky to buy individual stock, so you can go for low risk trading like mutual funds where you can track a large group of stock and see sharp changes.
Before choosing stock you should note down some important factors like where to invest, which company you want to invest, at the very beginning you should start investing in company which familiar to you.
You have to keep in mind that, if you buying any stock you are becoming a part of that company, so its natural, the value of your investment much depend upon the business of that company.
There are other factors which you have to keep in mind, before choosing a stock from the sea of thousand of alternatives, let’s dive into it
Define your goal
Firstly, you have to understand your goal and personality, as your personality type will help in choosing type of trade and your goal will determine the purpose of investment. As investor focused on income usually has aim at low- firm in industries and sectors like utilities. Personality will tell, if you are young and have a fast mind and want more action to stay focused try short- term trade like Intraday. On the other hand if you are older and just want to make little money you can go with low risk stock which is more appropriate.
Where to start
Now you are choosing a brand to invest, look for low cheep value stock it means investors are paying less price of each dollar what company earns.
This is measured by the stock’s price-to-earnings ratio, or P/E. P/E fewer than 15 consider as low and above 20 as high.
Sometimes cheep doesn’t good or expensive doesn’t bad as many times happens that cheap stock can be grow more stronger that’s why stock is expensive and stock which is expensive can be growing less or it is not producing enough profit. You can buy stock, keeping in mind that it’s worth reasonable high in future.
Whatever you decide, whether you are investing in long term or short term you have to understand that you need to study about that stock, or you can dig into the company profile, study all financial reports as all company out there report half yearly or quarterly.
As we know every stock has their own characteristics, study the charts, number of time frames on the daily basis, then you will understand the behavior of stocks and you can take the reference s of other stock.
You will understand the curves then you can add one more stocks, keep your eyes open and you understand the behavior of trading.
Look for company activity
Nowadays anything happen if you are trading in Intraday but your investment is for long term, then stock prices increases when company make more profits which usually happen when they growing there revenue. Also check for the bottom line of company, if there is a difference in income and expenses, that’s a company’s profit margin.
Know company’s dept and dividend
When you investing in a company, check there balance sheet and know how much debt company has, the share price of company with more debt is more unpredictable as the company’s income can be go to pay debts and interests.
Also see company’s unfair amount of money, if they browses by comparing with their counterparts.
Dividend is the sum of money which pay regular by a company to their shareholder, it also show the good financial health of company. Check for the payments history of that company they the dividend or not.
Don’t while buying stocks:
• Stock market is not a bargain place if it dropped then you should understand why and how it going to bounce.
• Don’t surprise by unpredictable of market, looks for the history of that stock in which you are interested.
• You have a plan to buy a stock but it also important the right approach to sell the stock, also know when you have to sell the stocks.
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