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Thinking of buying stocks?
1. Know the companies you are buying.
Ask yourself why you wld invest in such company. Know its operations. Know its future prospective. Understand the demand of its products. Can it adapt? How loyal are its customers? How good is the management?
1. Know the companies you are buying.
Ask yourself why you wld invest in such company. Know its operations. Know its future prospective. Understand the demand of its products. Can it adapt? How loyal are its customers? How good is the management?
2. Get to know the financials of the company.
Are they relying too much on debt or on equity? Debt is a killer during any crisis. How big are the assets? Know the balance sheet and the income statement of your company.
Are they relying too much on debt or on equity? Debt is a killer during any crisis. How big are the assets? Know the balance sheet and the income statement of your company.
3. Understand the profitability of the company.
You can use Earning per share (EPS) to evaluate the profitability of the company.
EPS = (Earnings ie Net income - Preferred dividends) /Outstanding shares
Note: Preferred dividends are dividends paid to preference shareholders.
You can use Earning per share (EPS) to evaluate the profitability of the company.
EPS = (Earnings ie Net income - Preferred dividends) /Outstanding shares
Note: Preferred dividends are dividends paid to preference shareholders.
4. Is the share price overvalued or not?
You can use Price Earnings (PE) ratio to check if the stock price is overvalued or not relative to other stocks in the industry.
PE = (Share price/EPS)
The lower the PE ratio the more undervalued a stock is relative to its earnings.
You can use Price Earnings (PE) ratio to check if the stock price is overvalued or not relative to other stocks in the industry.
PE = (Share price/EPS)
The lower the PE ratio the more undervalued a stock is relative to its earnings.
5. Are you buying value/dividend/growth stocks?
-Value stocks are quality stocks with undervalued price.
-Dividend stocks have a track record of consistently paying dividends even in bad yrs.
-Growth stocks have revenue & income that grows faster than the industrial average.
-Value stocks are quality stocks with undervalued price.
-Dividend stocks have a track record of consistently paying dividends even in bad yrs.
-Growth stocks have revenue & income that grows faster than the industrial average.
6. Are you in it for long term or short term?
This can also help you to decide the stock you want. Some stocks are good for trading but not for long term investing.
This can also help you to decide the stock you want. Some stocks are good for trading but not for long term investing.
7. Instincts
Yes you heard it right. Instincts! What do you feel about the stock? After doing all the analyses, what is your overall feeling? Go for the one you believe in.
Yes you heard it right. Instincts! What do you feel about the stock? After doing all the analyses, what is your overall feeling? Go for the one you believe in.
