Share market is a game with unexpected twists and turns at every corner. Whether you are an individual investor or a business entity, making the right investment is often a tricky endeavor. The often conflicting market trends and a continuous influx of information tend to confuse one and all. All of this and more makes choosing the right stock to invest in, the single most important decision an investor has to make. For the uninitiated, this can prove to be either of the two things – profit maximization or a financial suicide.
Here are 6 things to keep in mind while choosing a stock. Whether it be a small or big, share market investments are always a risk. Thus, choosing the right stock is essential to keep you afloat in the ever-turbulent sea that is the share market.
1. Know your endgame
Like any other fundamental life decision, the first step towards determining the right stock for invest in is to be clear about your end goals. Investors with income, capital preservation or appreciation – which essentially means a rise in the price of the stock from its PBV(Price to book), will each have a different investment criterion. For example, income-focused investors usually tend to focus on low-growth firms and sectors like utilities. Whereas investors with low-risk tolerance and primarily focused on capital preservation choose stable, and popular blue-chip corporations and firms. Investors aiming at capital appreciation tend to target stocks of companies with life cycle stages and varied range of market cap. Thus, before gambling your life savings or even a small chunk of your company’s assets away, it is important to determine what your end game is.
2. Stay Updated
With the ever-changing face of the share market, it is absolutely indispensable for an investor to stay on top of all the news and updates regarding the current market trends and reforms. Choosing the right stock becomes easier for an informed investor in touch with the changing tides and current market trends, compared to an uninformed one. Investment is a high-risk decision and gets sloppy as your market evaluation may lead you to a financial ditch, impossible to crawl your way out of. Constantly going through the latest news available across the multitude magazines, technological and social media platforms helps you in making an informed and safer share market investment.
3. Choose The Right Company
Once you have figured the type of investor category you fall under and researched the current market trends, the obvious next step becomes choosing a company to invest in. Going through their ETFs and other such marketable securities, using screeners and other financial aid tools along with scrolling through stock analysis articles are just some of the basic ways in which you can assess whether a company fits your investment space and requirements.
4. Turn To Corporate Presentations
So, now that you have done everything by the book, do you feel like you finally have a winner? Hold your horses and turn your attention to the investor presentations. These presentations not only provide a reliable and comprehensive overview of the company but also end up providing information related to the direction you can expect the company’s future to take and thus, make an even more informed and financially stable investment decision.
5. In-Depth Analysis
Having gone through the given rites of passage, you will probably be left with a limited number of options or even just one name. This is the time to dive into an in-depth financial analysis of the said options. Also, it’s totally fine if you decide that this industry is not the right one for you. Share market investments are a risk, not to be taken lightly and making a well-informed decision can make all the difference.
6. Throw in the Towel
It’s time to throw in the proverbial towel and sit back. Share market investments, especially the ones targeted at growth and not credit acceleration, tend to take time but the prize is worth the wait. Thus, expecting overnight miracles is not advisable, nor is panicking over the slightest market fluctuations. Make an informed investment and be patient with it.