What to Look For When Buying Stocks

What to Look For When Buying Stocks

Everyone has a system or a theory for picking successful stocks. When you buy stocks your are investing in the long term financial growth and success of the company, so there are a number of factors you should consider before you purchase stock. When you look at a company’s prospectus or financial statement, pay attention to the following details, as they will help you form a comprehensive picture of the company’s financial health and growth potential:

• Earnings: A company should have several consecutive successful years, which will be identified by a growth in their earnings. An annual 10% growth is a good indication of a solid company.
• Sales: Look for an annual increase in sales every year.
• Debt: Look for an annual decrease in debt every year. If debt reduction isn’t occurring, then make sure the debt is at least holding steady. It should be lower than the company’s assets.
• Equity: The equity in a company should grow every year.

When you are finding stocks for dummies, you should do a little (or a lot) or research. Be sure to read the company’s annual report, the 10K and 10Q reports the company files with the Securities and Exchange Commission (SEC) as well as some unbiased research reports. The Wall Street Journal, Investor’s Business Daily, and some stock investment websites are good resources.

Many investors analyze trading pattern variables to choose the right mix of stocks and companies. When finding stocks for dummies, you can analyze the average daily trading volume. Some investors believe that heavy trading (either buying or selling) adds value to a stock. If the stock price rises, investors look at the volume to see how many other investors are buying. When a stock price falls, the potential investors want to see how many traders are selling. These investors are simply comparing supply and demand.

When finding stocks for dummies, you can pay attention to the stocks highs and lows. Before you buy, you can compare a stock’s current price against that of its yearly high and low. This factor can be an indication of performance over a year.

The basic principle of finding stocks for dummies is to ‘buy low” and “sell high”. You can accomplish this by purchasing stock in profitable companies. These companies are making, selling, or distributing good and services that the general public wants and needs. Another rule of investing is to keep your portfolio diversified among a number of companies and industries. A broad stock portfolio will help you weather the inevitable ups and downs of the market.

Analyzing trends and familiarizing yourself with the basic financials of a company make choosing the right stock a little less risky. Of course, the stock market carries risk, but with a well thought out, diversified portfolio, you should be able to handle the ups and downs of any given day, week, month, or year. Finding stocks for dummies has never been easier, you just internet access and some common sense to start picking winning stocks.

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