Finding your first stock to buy can be one of the most fun and rewarding activities. Discover right here how to know what stocks to buy.
Being a beginner investor can be one of the most rewarding and exciting times in your financial life. It can also be one of the most discouraging and frustrating.
It can be so easy at this point to get caught up in a fervor of excitement thinking about the exponential earnings that can come from selling profitable stock after profitable stock.
This is where many only lead themselves to frustration and loss. Rather than blindly invest, why not take a few moments to gain a little about how to know what stocks to buy? This will equip you to use your hard-earned money only for sound investments.
Know a Stock's Projected Worth
Purchasing even the most sought after of stocks isn't going to be a sound investment decision if the stock is already within range of its projected value.
This projected value is determined by technical investment analysts. These are professionals who have expertise in the evaluation of asset futures. They make their projected valuations based on a number of factors such as historical asset data, market trends, and economic indicators.
Of course, since these are only projections, different analysts will have different valuations for an asset's future. This means that you will come across an array of projections for a stock you are considering.
Because of this, it is better to know what range your price point is for when to buy a stock.
For example, say a stock is currently priced at $40 with analyst projections ranging from $25-$45 over the next year. You could purchase the stock and still profit from it. Yet, with this range, your risk of loss is greater than your probability of gain.
Now say this same $40 stock has a range of projected values from $50-$75 over the next year. This would be an indicator of a stock on sale and would have a high probability of gain.
How to Know What Stocks to Buy By Knowing the Company
Another important factor to look at when learning how to invest in stock market assets is to know the company they are coming from.
If you are thinking about investing in a company whose business is in an area you have little to no knowledge about it may be best to stay away. This would make it very difficult for you to understand the trends and economic indicators that could affect this company's assets. It is generally a good rule to have a working knowledge of the company you are considering buying stock in.
It's helpful to know a bit about the company's financials as well.
A company may be showing a good revenue intake. Yet, if their level of debt is well above what their revenue is, it is best to stay away.
Also, since the point of purchasing a stock is to see a growth in value, you'll want to look at a company's profit earnings. Even if a company has a wealth of assets to choose from, if it isn't reporting any profit–any growth, neither will its stocks.
A Little Knowledge Can Save a Lot of Money
It's impossible to project all the different factors that could affect a company and its stock value. Still, knowing the above factors is a good basic rule on how to know what stocks to buy. This way you can protect your money by making rewarding investments.