How to invest in stocks with minimal risk
1. Buy only net cash companies
The debt ratio of most companies will increase as needed for development, so they must repay more interest. Once future earnings are not as good as expected, the company must be under greater pressure to repay debts. The recent Evergrande and Country Garden incidents are a typical example
Companies with healthy cash flow will develop their business relatively smoothly, even in the face of some sudden events, such as the COVID-19 pandemic causing the business to shut down. As long as you have a sufficient cash ratio, you can greatly reduce the risk of debt default and return to the pace of recovery more quickly
2. Buy only reasonable valuations
The company's valuation is an expectation given by the market. For example, for glove stocks in 2020, demand surged due to the outbreak of the epidemic, market capital began to shift to the glove sector, and they were willing to buy related companies at a higher valuation level. As a result, stock prices quickly doubled several times, yet investors sought after in the later stages had ignored the suspicion that they were “overvalued”
Valuation is directly proportional to performance. The higher valuation expectations are given, the better performance will have to be handed over in the future, and once the stock price is overturned, it will be “greatly discounted.” Before entering any company, we must review the performance of the past few years, exclude one-time or short-term sources of revenue, and observe the valuation levels of other peers at the same time, so we can get an idea of whether the current valuation is in line with performance expectations and reduce our misjudgments about valuation
3. Use only “spare money” to invest
Retail investors have a famous saying: they'd rather “break in and out” in the stock market than stay “out of nowhere”, even if it's been an extra day of waiting. This is because retail investors all have a pain point, that is, the capital invested in the stock market is limited, and most of them are not “spare money.”
Actually, you also know that there are really “few” investors who make money in the stock market through this method, because not everyone can keep an eye on the market every day. It's better to place limited capital on a representative that is in line with the trend, and at the same time ensure that this amount of money is not spent during the investment period, set an exit goal in advance, and the future return rate will definitely be a surprise
If you understand the above three behaviors, you can take a few steps less to “go the wrong way”
Follow me to take back control of the Malaysian stock market
The debt ratio of most companies will increase as needed for development, so they must repay more interest. Once future earnings are not as good as expected, the company must be under greater pressure to repay debts. The recent Evergrande and Country Garden incidents are a typical example
Companies with healthy cash flow will develop their business relatively smoothly, even in the face of some sudden events, such as the COVID-19 pandemic causing the business to shut down. As long as you have a sufficient cash ratio, you can greatly reduce the risk of debt default and return to the pace of recovery more quickly
2. Buy only reasonable valuations
The company's valuation is an expectation given by the market. For example, for glove stocks in 2020, demand surged due to the outbreak of the epidemic, market capital began to shift to the glove sector, and they were willing to buy related companies at a higher valuation level. As a result, stock prices quickly doubled several times, yet investors sought after in the later stages had ignored the suspicion that they were “overvalued”
Valuation is directly proportional to performance. The higher valuation expectations are given, the better performance will have to be handed over in the future, and once the stock price is overturned, it will be “greatly discounted.” Before entering any company, we must review the performance of the past few years, exclude one-time or short-term sources of revenue, and observe the valuation levels of other peers at the same time, so we can get an idea of whether the current valuation is in line with performance expectations and reduce our misjudgments about valuation
3. Use only “spare money” to invest
Retail investors have a famous saying: they'd rather “break in and out” in the stock market than stay “out of nowhere”, even if it's been an extra day of waiting. This is because retail investors all have a pain point, that is, the capital invested in the stock market is limited, and most of them are not “spare money.”
Actually, you also know that there are really “few” investors who make money in the stock market through this method, because not everyone can keep an eye on the market every day. It's better to place limited capital on a representative that is in line with the trend, and at the same time ensure that this amount of money is not spent during the investment period, set an exit goal in advance, and the future return rate will definitely be a surprise
If you understand the above three behaviors, you can take a few steps less to “go the wrong way”
Follow me to take back control of the Malaysian stock market
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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“投资，是人生必学的一门课”
我是一位90后的马股投资者，乐于分享上市企业的看法，透过教育提升大众对投资的认知🤝🏻
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