Become A Great Investor By Researching Your Stocks!
There are huge benefits to researching your stocks before you make a purchase! Do not invest in a company’s stock without taking the required time to do the necessary research! You have to do an “adequate” analysis of the company you are interested in to invest successfully.
There are two methods an investor can use to research stocks: Fundamental analysis and Technical analysis. I will later explain in detail each of these two completely different methods of analyzing stocks. It is a good idea to know what both of these methods consist of! However, the majority of investors today use, and place more of their focus, on fundamental analysis. Some investors use one method of analysis while others may use a combination of the two.
With the advent of technology today, it is easier than ever to perform the above analysis of a company’s stock! Most of a company’s information is readily available for you online on financial websites such as Google Finance or Yahoo Finance!
You want to make only “educated” stock picks not uneducated “guesses.” Make sure you examine each company, extensively, before clicking your mouse and, purchasing its’ shares. Read everything you can “beforehand” on the company you are interested in buying!
You should know what the company you are interested in does. What sector and industry is the company in? Do not buy stock in a company that you do not understand! As Warren Buffet would say: “This would be going beyond your “circle of competence!” In other words, only invest in areas you know best. Do not invest in a company if you only have a limited understanding of it. Be sure to focus only on companies you have some familiarity with.
In addition, you need to know why you purchased your stock in the first place. Its’ a good idea to jot these reasons down. This could help you in the future, should you decide whether, or not, to sell your stock.
For example, if a company’s shares that you own start to decline, and you’re “tempted” to sell your shares, it would help to refer back to your reasons for buying it in the first place. If your company’s stock still fulfills these reasons exercise patience and try not to sell prematurely. Selling may be a decision you may later come to regret!
It is also important that an investor checks out the management of the company! Is management performing well and acting in the best interest of its’ shareholders? Is management growing profits? Does management, going forward, have any “new” products in the making? Management should also be honest and possess integrity.
If you can’t research a company’s stock, thoroughly, forget about it! You won’t have enough information to form a good quality decision. And, in the process, you may, unnecessarily, lose money!
In conclusion, before purchasing stock in any company make sure you have performed the necessary research! You need enough information on the company you are interested in to make an educated and wise decision! This involves examining the company thoroughly by using either fundamental analysis or technical analysis, or both methods. It is also a good idea to check out the quality of the company’s management.