Basics of Stock Market Investing

By Revy Anandya Azhary

Basics of stock market investing
Investing in stock does not have to be complicated. In order for you to succeed in this risky business, learning the basics of the stock trading would be an important factor for your financial growth. Stock investing is not gambling or getting lotteries for the sake of money. It is a smart decision that takes considerable amount of calculations and intelligence to make money.

While anyone can become a shareholder, most do not completely understand stocks. They usually buy something based on something they heard on the news or worse, from a friend. Most people don’t look at owning stocks as owning a piece of a business, but in fact, you are a part owner and in many cases, you have a say.

Before risking your money with the stock market, you should be able to recognize the factors vital in choosing which company to invest in. Here are some things to look at before you invest your money in stocks.

Minimize Risks Than Maximize Profits
Preserve capital is the first thing you should be thinking. It is not necessarily you have to take greater risk to get better return. Try to reduce the risk of losing money by knowing exactly what they you do and do exactly what you know.
Pick Quality Stocks

High quality stock must be supported by strong business performance. The company must have good Sales Revenue. This refers to the amount of money the company makes annually. Don’t invest in companies that continually lose money every year.

Besides sales revenue, you also must look at their earning. This also refers to the net income that reveals if company is making money or losing it. Companies with large earning have an advantage in the stock market. A savvy investor will never invest money in a company that is not earning money.

The company’s debt also acts as an important factor for high quality stocks. If a company is in debt, the money they have is for paying up for the debit alone. An intelligent investor prefers companies that have low debt level.
Calculate Intrinsic Value

Intrinsic value is the actual value of the stock. It can be the same or different from the market price. You can either use dividend, cash flow or earnings discount model techniques to value stocks.

After you know about the intrinsic value of a company, try to buy stocks when the market price is much cheaper than its intrinsic value. You will be getting huge compounded return if you manage to buy the stock at much cheaper price than it should be. It’s never safe to gamble your money away on some company you don’t even know. The basics of the stock market lie on the companies’ background. Always do researches about the company before you invest your money in the stock market.