Researching stock trends can have you looking into a variety of factors to decide if you want to add it to your portfolio. This is called fundamental analysis and it includes the company’s financial situation and management- plus, many other aspects.
As a beginner, you will want to go into buying stocks knowing that it is going to be a long-term investment. Otherwise, they can carry a lot of risk. If you are not someone who knows how to day trade efficiently, then you are probably going to end up losing a good amount of your capital.
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Let us get started on what you need to know for researching stock!
Review the Company’s Financials
You can find this information on your broker’s websites, you should be looking for how the company performs. When you find this information, compare it to other stocks you are interested in buying. Which one will make you more money over the long term?
This information can also be found in a companies Form 10-K, which is an annual report that includes the companies income sources, how much it spends, and other aspects of its balance sheet. It will give you an impression of how the company is doing and how you might expect them to do next year.
Know What to Look for
Those financial reports have a lot of numbers on them that can be distracting. If you know what numbers to look for then you can focus on them and make better decisions. On those heft balance sheets, these are the numbers you want to look for:
This number is listed at the very bottom of the statement and shows the total the company made after all their expenses, including any taxes.
This number shows what the company brought in during the year. It is normally at the top of the page.
Earnings per Share
This number comes from the shares that are available for trading and how much you can expect to get from one share in a year. It represents how profitable the company stock would be for you. It is not always accurate but can give you a decent idea of what to expect from the company.
Don’t Forget Qualitative Research
Qualitative research involves the background of the company that you are buying stock in. You always want to know what your money is going towards, as stock is making you a part of that business.
Always be aware of how the company is making money- investing in companies that make sense to you is always a better idea than buying into one that has confusing practices.
You are also going to want to know what could slow down the business’s ability to grow. Are they outdated or being replaced with something new? Those are two major signs that a long-term investment would not work out well for you.
Make a Bigger Picture
Finally, you are going to want to gather all of your research into one bigger picture that can give you insight into what is going to happen. Before buying any stock, know the risks and rewards of doing so.
You can also do this by checking the historical data of a company’s stock, as it will likely repeat itself or give you background into what to expect.
Buying a stock as a beginner can be nerve-wracking, especially if you do not know what to expect. As long as you keep these aspects in mind while researching, you should be able to determine if a stock is worth your money and time.