Investing in stock can prove to be a very effective investment is also filled with market risks. An investor who has very little knowledge about the stock market can fall prey to losses. Thus it is always advisable for investors who are not in the financial profession to attain knowledge about stocks. But it is sometimes not possible to conduct a full research on the different stocks, so what the investors can do is gain at least some basic knowledge about the stocks so that they can avoid losses. Also, investors can track real time stock market data to get a better idea before buying any stock.
The following are some of the key factors that new investors entering the investment market can consider before investing in different stocks available in the market.
Data about company
Investors should avoid investing before having complete knowledge about the company they are considering for the investment. Investors should know what the company manufactures or the kind of services it provides and where it operates, its cashflows, sales, and profits. An investor can get all this information in the company’s Annual Report and the Director’s Report.
Investors should not invest before they know all the details relevant to the investment in the company.
Systematic risk is the type of risk that cannot be avoided by investors. It’s also known as Beta. Systematic risk measures the volatility or the risk of the stock about market conditions. This risk is mostly unpredictable. Thus one can measure it through evaluating the last five-year volatility involved in the company stock.
A benchmark (say, S&P 500 index) is used for its measurement. If the company value is more than the benchmark index, then it has higher beta, and if lower value, then lows risk. Higher risk does result in higher profits, but stocks with higher risks need to be continuously monitored, whereas low-risk stocks are much safer and need very less monitoring.
The charts prepared by every company is a part of financial and technical analysis. Thus it contains many informative details that will help with making investment decisions. The charts are of different kinds, such as bar charts, line charts, etc., that portray different parts of the company.
Chart reading can seem difficult for nonfinancial professionals, but the easiest way to understand some of the basic charts is through some basic skills. If the chart goes from lower to higher in the right direction, then it is a good indication, and if the chart has a downward slope from left to right then, it is better to avoid investing in the firm.Oen can also take help from real time stock market data to get a better insight.
The dividend is the return the company pays to its stockholders on an annual basis. The dividend is mostly on cash basis and is from the profits of the firm, and is essential for the investors because it becomes a fixed stream of income. The dividend amount is decided by the Board of Directors of the company. The reason why dividend becomes a key reason is that a regular dividend-paying company has higher and predictable profits; thus, the risk of losses is less with these companies. Thus, it is advisable always to check the dividend rate.
Price-to-earnings (P/E) ratio
This ratio states the relationship between the current price of the share to its per-share earnings. If the P/E ratio is high, then look for a reason as to why it is high, and if the ratio is less, then it is a good investment opportunity.