Many people would like to know how to invest in stocks. But if you are like most people with limited
investment and financial literacy, understanding how to invest may sound complicated and
may leave you scratching your head wondering how you can make any sense of the investing world.
Well, it’s much like riding a bicycle. It takes practice and repetition. You just have to do it over and over again.

The investment market news

We have all heard the news on TV or read in the paper that the Dow Industrials had their worst
day in at least 20 years. If this were true, how come the value of the stocks
that make up this Dow Industrials was up 5.5% YTD, 5% YTD, 5% YTD?
Well, this would indicate that most of the market is performing better than the Dow.
But it is not. It is actually the opposite. This is due to the fact that other major indexes,
the S&P 500, are up by 5% YTD. The Dow is down 4% YTD. Why?

How to choose your market

Most people look at the economy and think that it will always outperform the Dow.
This is how many investors have been making money in the market.
The market has been making money for many years. But, if you had to choose one out of the
three major indexes, you should have gone with the market. In fact, it is only due to the fact that
the market has been making more money since it is a better gauge of overall economic health.

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How to decide what stocks to buy

There are 2 major metrics that I look at when deciding if a stock is a good buy or not.

1. Earnings Per Share – EPS
– This is simply how much a company is making per share of equity.
This number should be your barometer on how well a company has been doing.

2. Price-Earnings – PE
– This is simply how much you should pay for each dollar of earnings generated by a company.
When looking at PE, you should not look only at earnings, but at free cash flow also.
This will give you a better picture of where the company is headed.
The formula for PE is (Earnings – Earnings per Share) / Shareholders Equity.

If you think that a company is doing well, then you should invest in this company.
If you think the company is sinking, then you should sell your holdings.

You should start by buying the stock you feel will not do you any harm.
Also, you should make sure that you are buying the stock you feel is a good value,
and not the stock you think will make you more money. Remember the market is a voting machine,
it allows the companies that are in the strongest to stay in the market.
It does not give them the opportunity to be replaced by someone who will. If you think a stock is
going to do you more harm then good, then steer clear of it, you will be better off not having it in your portfolio.

Study and know the company well

After you decide on the stock you are going to buy, then you should examine the company.
You should read their annual report and make sure you understand everything that is on the annual report.
You should also read their quarterly reports, and see if there is anything
you are not seeing on the quarterly reports. This is your chance to study what the company is doing,
and see if you want to continue with the company or not. There are people who buy and hold forever,
and the reason why they are good is because they have done their research, and they know what
they are buying, the company is doing, and that the company will stick around for a long time.

Other people look for solid reasons to sell the stock they have. The solid reasons are things like missed earnings,
higher risks of lower earnings, missing sales forecast, higher debt to equity ratio, and many more.

Now when you are ready to buy the stock, you should use your own judgment to determine if
the company is worth buying. After you decide if you want to buy the stock,
then you should look for a brokerage firm to buy from.

Should you use brokerage firms?

There are many brokerage firms out there. The choice depends on what you need,
and if you need something fast, or something easy. It depends on your need.

Now you should be looking for an intraday stock broker that you can trust to make your trades.
It should be someone you know and have worked with in the past. Someone who is fast, and reliable.
Someone who will tell you when you have made a bad trade, and will help you fix it right away.
You should look for someone who has many satisfied clients.
The brokerage firm you choose should be someone you are comfortable with,
and who will not ask for a lot of money up front.

Once you have found your intraday stock broker, you should look at their portfolio,
and see if there are any current clients you should be talking to. It should be someone
you are happy to service, and someone who will service your current and future clients.

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Wandji Nguemako
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