Investing 101: How to Research Your Stocks Before You Buy

Even though it will inevitably happen, investors don't want to lose money in the stock market. However, you can decrease your chances of selling at a loss by carefully researching stocks before you buy them. A few hours of online research can save you hundreds to thousands of dollars.

Things to Consider

Long at the long-term history of the stock you're considering. Has it grown over time? Does it fluctuate often? Look for steady growth over a long period of time and try to avoid buying stocks that are in any industry that is declining. You should also consider whether or not the stock pays dividends. Stock dividends can be a good source of residual income as long as the stock holds its value and/or increase in value.

Know the Company

Publicly traded companies publish annual reports, usually on their website, every year. Don't just look at the most recent year. Look at the company's performance over as many years as you can. What is the company's financial health like? Are profits increasing or decreasing over the long-term average. Did the independent accountant noticed and trends or issue that may affect the stock value? All of these things are important to consider. Companies that continue to profit year after year are usually considered lower risk stock investments. If you can't find their annual report online, try visiting and looking the company up.

Get Analyst Information

Sometimes you have to spend money to make money. Analysts are professionals that follow various companies, assess their current performance and give their educated opinion on how the stock will do in the future. If you want to buy a particular analyst's report, you will have to buy it. However, it can be a valuable source of professional financial market information when trying to choose the best investments. If you're leery of investing too much money in reports, then peruse financial sites for company summaries created by analysts. Often, the summaries are less expensive on a website, sometimes they are even free. While you shouldn't follow every trend, getting a perspective of what the rest of the financial market thinks about the company is a good idea.

Insider Trading

The term insider trading has a bad reputation because of some high-profile scandals, but the truth is that when it is done the proper, legal way, it can provide a valuable source of information to potential investors. Insider trading is when an investor trades within his or her own company. Inside traders have to file reports on the stock they buy and sell. Search financial sites for insider trading reports and you'll be able to take advantage of what traders think about their own companies, they often will know more about things going on there than you could find out on your own.

Playing the stock market can be tough. There is always the potential for something unforeseen to happen. Accept that the fact upfront that you will make some bad decisions. However, if you do your homework before you put your theories to the test, you can make a lot fewer bad decisions and a lot more money.

Post a Comment

Previous Post Next Post