Do your homework! Control emotions!
Fundamentally, before picking stocks, you have to know yourself if you are doing it for long or short term. This will help you decide whether you are going to do value investing or just short a stock counter. Do your research and understand the stock and what business it is in. This includes fundamental and technical analysis to determine the fair value of a stock, as well as understanding the prospects of a business. Usually, one should use a mixture of quantitative and qualitative stock analysis to build one’s portfolio.
Avoid emotion when making investment decisions. Do not simply buy a stock because it is on the rise and also you should not be forced into sell position especially when you foresee a cash strapped situation coming up. Make sure you spread your risk by diversifying your portfolio.
Some people like stocks that pay dividends, because they can be reinvested to increase the size of a holding. Hence, a stock’s return on investment is not only based on the capital growth relating to the initial amount deposited, but also on any dividends that have since accumulated from it.
Before buying a stock, the qualitative factors to consider include company news (any restructuring on going or coming up), personnel changes (CFO or CEO step down or up or transfer a popular leadership from another company) and financial events (like City Dev sell languishing Sincere away) which can affect the trend of the stock in long and short term.
Other quantitative factors to consider are earnings releases (changes in company earnings), balance sheets (list of assets and liabilities and if liabilities are high then risk is higher), price-to-earnings (P/E) ratio (how much you would have to spend to make $1 in profit and determine whether a company is currently overvalued or undervalued) and return on equity (ROE) (measures a company’s profitability against its equity, indicating if the company is generating enough income by itself relative to the amount of shareholder investment)
If all these mentioned above are confusing to you, then a mutual fund or ETF is a better choice for you. They worked as a bundle of many individual stocks put together for investing. A fund could invest in dozens or even hundreds of stocks and when you invest in the fund, you will be partially investing in all of the stocks it contains. Funds offer the advantage of diversifying your portfolio.
Finally, do not buy stocks with the expectation that a company will take off and you will become a millionaire in a short time. There is a higher possibility and more often than not, many have lost money in it. So one should go back to the fundamentals. Good luck!![]()
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Avoid emotion when making investment decisions. Do not simply buy a stock because it is on the rise and also you should not be forced into sell position especially when you foresee a cash strapped situation coming up. Make sure you spread your risk by diversifying your portfolio.
Some people like stocks that pay dividends, because they can be reinvested to increase the size of a holding. Hence, a stock’s return on investment is not only based on the capital growth relating to the initial amount deposited, but also on any dividends that have since accumulated from it.
Before buying a stock, the qualitative factors to consider include company news (any restructuring on going or coming up), personnel changes (CFO or CEO step down or up or transfer a popular leadership from another company) and financial events (like City Dev sell languishing Sincere away) which can affect the trend of the stock in long and short term.
Other quantitative factors to consider are earnings releases (changes in company earnings), balance sheets (list of assets and liabilities and if liabilities are high then risk is higher), price-to-earnings (P/E) ratio (how much you would have to spend to make $1 in profit and determine whether a company is currently overvalued or undervalued) and return on equity (ROE) (measures a company’s profitability against its equity, indicating if the company is generating enough income by itself relative to the amount of shareholder investment)
If all these mentioned above are confusing to you, then a mutual fund or ETF is a better choice for you. They worked as a bundle of many individual stocks put together for investing. A fund could invest in dozens or even hundreds of stocks and when you invest in the fund, you will be partially investing in all of the stocks it contains. Funds offer the advantage of diversifying your portfolio.
Finally, do not buy stocks with the expectation that a company will take off and you will become a millionaire in a short time. There is a higher possibility and more often than not, many have lost money in it. So one should go back to the fundamentals. Good luck!
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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