When it comes to investment research in the stock market, everyone gives you their advice related to the stock market with a do’s and don'ts list.
However, while researching the stock market, it is advisable to stay away from such noises and consult some financial experts as they will provide you with valuable information regarding stocks and their trends. Also, they tell you the future value of a stock based on their past and present performances.
Investment research can be overwhelming and intimidating tasks for beginners because they are completely unaware of the stock market and its working. They don't know how the stock market exactly works?
Plus, the unpredictable market trends, insecurities and risks associated with stocks are some of the important reasons that make beginners hesitate to enter into the stock market.
Nevertheless, the case is exactly the opposite of what you think. Investment research is not as difficult as it seems to be. If done properly, these researches can turn out to be the biggest reasons for gaining positive returns from the stock market.
The secret key to understanding the stock market is to read the company's financial statements and you are ready to go.
Get Started With Researching Stocks
For beginners, it is suggested to invest in company’s shares only after doing complete research. This is because brief research gives you several ways to analyse a stock and its value. For instance, you can easily predict a stock’s future value by comparing its performances for the past 5 years. All you need to go through a company’s financial statements.
There are two ways of identifying a stock: Technical analysis and fundamental analysis. Technical analysis is an analysis of predicting a stock’s history based on past market price, price and its volume. In fundamental analysis, investors try to evaluate the stock’s intrinsic value by examining and analysing the factors that could influence the stock’s price in the future.
Here, we provide few ways to get you familiarised with investment research:
- Identify the basics of a company
- It is important to identify the fundamentals of a company before purchasing its stocks. This will help you to figure out many things that are important for investment research. For instance, what is the company’s position in the market? Is the company a big giant or just a startup who has recently started to expand their business?
- Research the management team
Financial statements help you to analyze many factors of a company such as who is running the company? Are the leaders strong enough to handle the company during a crisis? Try to go through the annual report of a company as it comprises directors and a mix of experience across the board.By reading a company’s annual report, you will come across important information such as who are directors of a company? Are they buying shares in their own company and more?
- Go through the Financial Reports of a Company
- Financial reports contain plenty of information regarding the company’s shares and therefore it is suggested to go through financial reports of a company.
Revenue is the amount of money a company earned during a specific period. It is mentioned on the top line of the income statement. Sometimes revenue is broken down into two different things: operating revenue and non-operating revenue.
Operating revenue is a type of revenue that is generated from a company's core business. On the other hand, non-operating revenue is generated from one-time business activities like selling of an asset.
Net IncomeNet income is the total amount of money generated after tax and depreciation subtracted from revenue. You can relate revenue with your gross salary and net income is equivalent to whatever amount has left after paid taxes and living expenses.
Earnings per share (EPS)You can count earnings per share by dividing earnings to the total no of shares available to trade. With EPS, you can easily compare a company’s profitability on a per-share basis.
Price to Earnings Ratio (P/E)Price to earnings ratio shows you how much investors are willing to pay some amount to receive $1 of the company’s recent earnings. You can measure the price to earnings ratio by dividing a company’s current stock price to its earning per share.
What is the Right Time to Buy Stocks?Well, it is difficult to get the right time to buy stocks, however, there are few things you can do to minimize your risks and maximize your profit margin.
Frequently check share price performanceAs you all know, the stock market is dynamic and keeps on changing. Therefore it is advisable to continuously track the market trends. The downfall of a share price could be a good opportunity to buy them. On the other hand, rising share price allows you to sell the existing shares and earn profit from it.
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