How do you assess a stock before you decide to invest or hold off on it? If you want to be profitable, it’s crucial you know.
Investing is one of those things that more and more people turn to as they get older and want to make their futures as financially sound and prosperous as they can be.
But you can’t simply dive into trading without knowing how to look at a stock and see if it’s worth your money and whether it’s likely to offer a return on your investment.
It’s essential to assess stocks properly, but how exactly do you do that?
Look at the Price History
The price history of the stock will give you a good general indication of where the stock is likely to head next.
Of course, this can’t tell you everything but it can give you a good idea of what the stock is like and what you can expect from it going forward.
If you were to look at the Qualcomm stock price history, you could make a more informed decision on whether to invest today. And the same holds true across the board.
Consider the Dividend Yield
Stock growth is not the only way to make money from a stock. You can also earn significant sums from stocks that pay out dividends.
This is something that’s definitely worth focusing in when you’re a beginner because it means that you can earn some money even if the stock turns out not to grow in the way that you wanted or expected it to.
The Price to Earnings Ratio
The price to earnings ratio is the one ratio that every investor agonizes over, and that’s a sign that you should start paying attention to it too. Stocks with higher P/E ratios are more likely to produce earnings for investors, and that’s why these are the ones that investors chase. It’s something you should definitely assess and weigh up before investing.
The PEG Ratio
The PEG ratio is the price to earnings growth ratio, making it slightly different to the P/E ration mentioned above. It takes the P/E ratio and then divides it by the growth of the company’s earnings on a year to year basis.
This means that what you should be looking for is a stock with a low PEG ratio.
Your Own Knowledge
Finally, you need to make sure that your own area of expertise are somewhat reflected in the stocks you choose to invest in.
For example, if you know the retail sector well because of your career, you will be more likely to succeed by investing in the retail companies you know are likely to have bright future. And the same applies to wherever your own interests and areas of knowledge lie.
It’s essential to ensure you look very closely at stocks before you think about investing in them. Every investor will tell you the same thing; you only succeed as an investor when you’re willing to put in the time it takes to assess a stock and its viability. So don’t take any shortcuts on this issue.