How To Evaluate And Buy Stocks
Too many people spend time cutting coupons to save $ 0.50 or drive through the city to save $ 0.10 per gallon of gas, but then spend thousands of dollars Hard to make money buying stocks based on tips from friends or so-called TV experts. This article lists some simple guidelines when buying stocks to help you increase your chances of successfully investing in the stock market.
First, get some idea of the investment. The best sources are CNBC and Yahoo Finance. Again, do not buy according to recommendations. This is just the starting point. Get the facts of the stock. Go to CNBC or Yahoo Finance again and enter the name or stock symbol to get the information. Look for the following:
- Has stock returns increased by at least 10% over the past three years?
- What is the PE (price earnings) ratio? You want the PE ratio to be close to or less than the above rate. If it is higher, do not buy!
- What kind of cash flow does the stock produce? Cash flow is good. A company that generates large amounts of cash flow and shareholder-friendly can use cash to buy another business, pay dividends, or buy back stock, all of which can increase the value of your stock.
- Is the debt of the stock below 35% of its capital? Just like your personal finances, if you owe too much money, your income drops or the cost goes up and you have trouble.
- What is the return on shareholder equity? Simply put, net income divided by the company's total assets minus its liabilities. In other words, what the company did compared to its value! If you have $ 100 a year and only $ 1 a year, are you happy?
- Does the stock pay dividends? Compare it to dividends paid per share per year with cash flow to get an idea if it is safe. If the cash flow per share is close to the dividend per share, it may be unsafe if future bad conditions occur.
Obtain a second opinion. One source is the Value Line Investment Survey. This publication provides all the details you need. You will spend a few hundred dollars a year, but how many times have you lost this money in a day due to a bad choice? Standard and Poors are also a good source. Check with your broker and they can offer one of the above or another second opinion free of charge.
Every time you stop swinging the fence. Yes, you get a great hurry with the stock picking up dramatically within a few days. Worry not to lose money and smart choices. Exit chasing high-risk / high-return stocks.
Be patient. One of the best qualities of the Warren Buffet is his patience. He could sit for billions of dollars a year like a cat waiting for a mouse. Once the stock reaches his buy level, then he bounces back. Finally, list the stocks you are interested in and create a portfolio in Yahoo Finance. Follow the stock, read the news, when it gets your price, buy it.
The following links should help you to conduct research and analysis:
CNBC, Http://www.cnbc.com Yahoo Finance, Http: // finance. .com [Http://finance.yahoo.com)].
Good luck and good stock selection!