With so many options to choose from and factors to consider, how do you know where to start?
Research is key, but where should you direct your focus as you begin to research?
And what steps should you take once you have looked up helpful information?
In this article, we will take a look at helpful tips, tricks, and resources that can help you learn how to pick stocks and become a good investor.
Research Before You Invest
First things first, as a new investor you will have to do your homework.
There are literally millions of options available for investors who are ready to put their money into the stock market.
But where should you begin? Understanding what to look for in a company and knowing how to discern which companies will provide long term benefits for you are both key.
And the best way to figure this out is to do some digging.
Research with specific outcomes in mind so that you know what to look for when you pick stocks.
Then do your homework before you make any investment moves.
This may take time, but it will help ensure that you are making profitable and market-savvy investments, even as you are just starting out.
Follow Trends in Earning Growth
As you research a particular company to assess its relative value for you as an investor, there are some specific things to look for.
Following a company’s trends in earning growth over time is a good way to understand the direction those stocks are moving towards.
Does that company’s profits increase or decrease over time?
If their profits generally increase, it’s a good sign that the company is moving towards lasting success and presents a high value investment opportunity.
This is generally the case even if the growth is small over a long period of time.
If, on the other hand, the company’s value seems to be decreasing over time, this is a good indication that you should steer clear of those particular stocks.
Investigate each company’s financial reports, both annually and quarter over quarter.
The trends these reports show can reveal whether company revenue and earnings are on the rise or on the decline.
Does the company have a proven record of stability? What about a viable plan to continue to increase its earnings in the long term?
Look for a company with a realistic strategy to boost sales, draw in new customers, and release new products.
That will keep their profitability growing, which is good for your investment value.
Compare the Company’s Debt-to-Equity Ratio
While it is normal for every company to have some amount of debt, take a look at how the debt a specific company has accrued compares to industry norms.
When you look at the average amount of debt that most successful companies have at any given time, how does this company stack up?
While even major international corporations like Amazon and Apple Inc. have some amount of debt, the level a company displays can indicate how well they are doing financially.
If the company has extremely high levels of debt in relation to their equity then you may want to avoid investing here.
The company should either fall in line with the average debt-to-equity ratio for that industry, or should offer a reasonable explanation of why their debt is so high.
Is Their Executive Leadership Effective?
While data-based ratios are one important way to assess a company’s likely trajectory and value, there are more qualitative ways to determine a company’s viability.
How trustworthy do the people running the company seem? When you invest, you want to know that the company is stable and that it will stick around for a long time to come.
You also want to feel that the company is innovative, offering cutting edge ideas, and flexible, so it can bend with the times.
A company that is well-managed will have better stock prices that follow higher trends over a lengthy period of time.
If the executive leadership is effective, they will be able to steer their company toward success through many different phases of the business.
And as an investor, you will want to be sure that the executive leadership is transparent and honest with investors as well as with employees.
To assess the success and reliability of a company’s executive team, read through transcripts of their previous speeches and presentations.
Listen to their earnings calls, delivered quarterly.
Try to get a sense of how the executive team interacts with shareholders. And trust your gut- if you feel uneasy with a particular executive team, don’t invest.
Look for the Long Term
As you do your research, make sure you consider a company’s strengths and potential in the long term. Does the company exhibit strength and stability over time?
Just as it will take time, patience, and long term thinking for you to become a good investor, so too does it take time for companies to prove themselves to be worthy of your investment.
If you are making an investment that you want to see grow for years to come, then this should be an important factor to consider.
Use investment tools
It may seem almost too good to be true, but you don’t have to pay tons of money to a broker in order to gain access to real time high level insights into the stock market.
The Wealthface app offers free tool that you can download right onto your smartphone or tablet.
Wealthface can provide insights into the market and help guide you to shape your investment portfolio in the best way to satisfy your investing goals.
The app offers convenient and easy to navigate resources that will save you time, and help new investors get accustomed to the many factors you may need to consider as you begin to invest.
Wealthface also offers a valuable stock screening tool for investors.
With so many factors to consider, you will certainly have a fair amount to sink your teeth into as you begin to research your investment options.
Take advantage of the resources available to you- like the Wealthface app, which can save you time and hassle, allowing expert insights to help guide your investing journey so that you can become a good investor.