Investing in stocks is a great way to look after any spare money you might have around. You can add an ongoing source of income with stocks if you look after your investment well. But it’s important that you choose the right one, or your investment will only return with pennies or worse, nothing. It’s simple enough to learn a few things to remember when browsing stocks to make sure that you’re in for a reliable and lucrative investment. Whether you’re interested in, for example, how are share prices determined? or you’re wondering where to start, we’re breaking down how you can be sure that you are investing in the right stocks. Read on for all the details.
Set your goal
It’s important to set goals in just about any endeavour in life. You go to university for a degree, you get a job for a salary, or something more fulfilling, etc. It gives you something to work towards, so that you don’t pack it in an hour into your exams.
Investing is no different. You will need a goal to stop you pulling your money at the wrong time. This can be the goal of saving up for a particular event or expense, saving for retirement, supplementing your 9-5 salary, or making investments your primary salary, etc. All are valid and good reasons to get into investment, but you should nail down one to make sure you don’t split your focus.
With a goal in mind, you will be able to see a light at the end of the rainbow and make better decisions knowing what’s at stake.
Keep your eyes open
With the introduction of the internet, the financial community has exploded. No longer are the Wall Street guppies the geniuses of finance, hiding their know-how behind stone walls. Now advice is freely shared across social media platforms. Reddit, in particular, is a common place to find advice on the latest investments. Keep an eye on relevant trending topics on Twitter to see what the latest discussions are around.
But also keep an eye on the news. You can gain a lot of common sense insights from what is happening in the world, and spot where a surge in demand might evolve from societal shifts. But don’t take your own word for it. Look at qualitative research, corporate press releases and investor presentations for some analysis. An emerging middle class in another country might cause a rise in demand for new products but that doesn’t mean the products you pick will be in high demand.
Diversify
This example of a demand for new products demonstrates why it’s a good idea to diversify your investments. If you can afford it, split your money into various investments. That way, if you’ve made a mistake on the type of products you expect to lift, chances are one of your ideas was right. If you vary your choices and spread your money across various stocks, you’ll have a safety net should anything go wrong down the line.
Find companies
The next step is to identify companies, which you can do in three ways. First, you can find the ETF, or exchange-traded funds which will follow and display the performance of the industry you’re looking at. You will be able to see the stocks they’re investing in with that. Simply search for the industry you’re looking for, plus “ETF” and the official ETF page will have the fund’s top holdings displayed on the site.
You can also use a screener and filter out elements of stocks like sector and industry. This has the added benefit of a screener allowing you to sort companies based on dividend yield, market cap and other metrics, so you can make a more informed decision.
And the final way is to hunt the old fashioned way. Look through financial news articles, blogs, stock analysis articles, and other news and commentary on companies in the industry you intend to invest in. But remember to keep a critical hat on and look at both sides of any given argument.
Look at corporate presentations
So that you are clear on the intentions of the company you are looking into, and how they intend to grow, take a look at their corporate presentations. They are easier to absorb than 10-Q and 10-K reports and you might need to get through a few of them before you make a decision on who to invest in.
They will also offer insights into the direction of the industry, so even if they say something that has you saying, “I’m out”, they might offer a nugget of insight that you can use to inform your next stock decision.
Conclusion
By now you should have at least one, perhaps a small collection, of potential companies to invest in. on the other hand you might have nothing that makes you feel safe, and there’s nothing wrong with that either. That gut feeling probably saved you from a bad investment and losing money.
If you have landed on a company to go with, you can open your account with your investment platform and get started.
