You may experience some ups and downs while you are in a financially ready position to start buying stocks. While stocks accounted for some of the highest returns in the financial markets, they have also suffered declines over the years. When choosing from thousands of stocks trading, the last thing you want to do is invest in a company that cannot give you what you hoped for. You can be a knowledgeable and good investor if you carefully learn about the value and potential of a stock as well as being aware of the risks that could cost your future profits.
7 KEY POINTS IN EXCHANGE INVESTMENT
It is easy to invest, but difficult to invest successfully. Statistics show that the majority of investors who are not investment experts lose money every year. There may be various reasons for this, but the most important ones are the lack of time to research large amounts of stock and the absence of a research team that can help with investment work.
Therefore, investments made after a small amount of research often result in loss. This is bad news. The good news is that Although the ideal way to buy a stock is after a lot of research, investors can reduce the amount of research to be done by looking at the recommendations below.
WHAT IS SHARES, HOW DOES IT WORK?
In his book, “Real Money,” Jim Cramer advises investors not to buy any stocks unless they have detailed knowledge of how they are making money. What are they producing? What kind of service do they offer? In which countries do they operate? Are they recognized as leaders in their field? Think of these questions as your first meeting with stocks. You probably wouldn’t have met someone you had no idea who you were or you had no idea about. Stocks are also like this; If you invest without recognition, the consequences may be negative for you.
It is very easy to find information about stocks. Using the search engine of your choice, go to the company website and research and read about them.
One of the first issues to be considered when buying stocks is the price to be paid for each share. This determines not only your investment strength but every amount of security you can buy. If you are buying shares through a broker, you can expect an average amount in commission for each stock you buy. If you think the price of a stock may go down, you can set a limit with your broker.
A company is expected to make high profits in the future, and it may be cheaper to buy a $ 100 stock right now. Conversely, a $ 2 stock can be much more costly if the earnings come from a company that is experiencing difficulties. When you buy a share, you hope to share the profits the company makes. The performance of the share depends on this gain and whether companies are expected to make the profits that financial analysts expect.
PROFIT SHARES (DIVIDEND)
When buying stocks, find out if companies pay dividends to investors. These are cash payments that companies offer / option to make to shareholders when they have sufficient funds. Dividends can generate income even when stocks fall for a period of time. This is why pay attention to whether companies have a history of increasing dividends. For example, an article was shared that more than 100 of the 500 companies represented on the stock market index, the S&P 500, increased their dividend payments over a 12-month period.
If you are buying a large number of stocks, understand what the market risks are within the industries in which companies trade. For example, as the stock market progresses and the economy grows, all stocks may appear to be making money. When the economy returns to its former state and consumers stop spending money or a tech company’s product does not exceed expectations, companies risk losing their revenues, which could lower stock market prices.
You can find out the highest and lowest points of stocks in the last 1 year through their websites. This information can give you insight into an area where the stock has traded over the past 12 months. If the stock is trading near its 52-week high, it is predictable that it will not rise very rapidly anytime soon. If the stock is currently trading near its low point, you can assume that there may be some problems lowering the company’s price.
PRICE / INCOME RATE
Imagine for a moment that you are in the stock market and looking for someone who can help you with your investments. For this, you are interviewing two people. The first person has a long history of making people a lot of money. Your friends have received a huge return from this person and you can find no reason not to trust him with your investment funds. He says that for every 1 lira he will earn you, he will leave you 60 cents and keep 40 cents himself.
The other person is just starting out. He has little experience and although it seems promising, he doesn’t have a successful track record. The advantage of this man is that it is only cheaper. He wants to get 20 cents for every 1 lira he will earn you. What if this person doesn’t earn you as much as the first?
If we take this example, you can more or less understand the Price / Earnings ratio. If a company’s Price / Earnings ratio is 20, it means that investors are willing to pay 20 Turkish lira for every 1 Turkish lira for each earning. This may seem a bit expensive to you, but not so expensive if the company is growing fast. The Price / Earnings ratio can be found by comparing the current market price with the cumulative earnings of the last four quarters. Compare this number to other companies similar to the one you researched. If your company has a higher Price / Earnings ratio than other similar companies, there may be a better reason for that. If there is a company with a lower Price / Earnings ratio but is growing fast, it could be an investment worth pursuing.
Beta may seem like a difficult thing to understand, but not at all. Beta measures volatility or how balanced your company’s stock has been over the past five years. With beta, anything higher than 1 means high beta (meaning high risk) and anything lower than 1 means low beta (low risk). In other words, if the beta value of a stock is 1, it is expected that the stock will gain 10% value at a time when the index increases by 10%, and that share will decrease by 10% when the index decreases by 10%. One can say that the beta value of a stock is a measure of the market risk of the stock.
You should keep a close eye on high beta stocks, because while they have the potential to make you a lot of money, they also have the potential to take your money. A lower beta means one stock is not as responsive as the others. Your money is much more secure at low beta. You may not make a lot of money in a short time, but you don’t need to keep track of it every day.
There is no substitute for extensive research. However, one of the key ways to protect your assets is to invest long-term by leveraging dividends and finding stocks with a proven track record of success. If you don’t have serious time for this business, you should avoid or minimize risky and aggressive trading strategies.