Stocks are lucrative, provided you have picked the right one. This might sound simple and down right obvious however only by picking the correct stocks will you give yourself the best chance of multiplying your investment funds over the coming years. This is the sole reason why brokers and investors are so keen on perfoming copious research into companies prior to investing their clients hard earned money into any stocks.
The only reason why you want to buy a stock is to double or triple your money in a certain span of time, right? Then why would you invest in a stock that hasn’t improved or shown any considerable growth? If you are investing in the stock market, then your intuition and the ability to take the make the right decision at the right time are two things that will decide the outcome of your investment portfolio.
A right decision could mean a fortune to you
A right decision to pick the right stock can make you rich; but a wrong decision can bankrupt you as well. The stock market is unpredictable and so are the stocks involved, but for stabilizing your investment you need to pick a stock, which is stable, lucrative and worthwhile. Obviously it isn’t easy; if it had been then everyone might have invested in it. But, it isn’t that challenging as well. For ensuring that YOU pick a right stock, simply glue yourself to this website and just continue reading. You’ll learn each and every aspect of picking up the right stock or at least saving yourself from buying the bad ones.
Before you decide upon, which stock to invest in; make sure that you have pondered over the following points:
- The History of that particular company
• Its geographic location
• The rank or position of the company in the stock market world
• Financial position
• Promoters and supporters
• Distribution of its stocks.
These points might appear to you as odd, but will definitely help you in short listing some good stocks available in the market. After evaluating in depth about a company, you must have acquainted yourself with all the crucial information about that company in good detail. After knowing some formative things about the stock holding company, analyze the following mentioned three chief financial rations.
By simply evaluating these ratios, you’ll be able to predict whether that share will grow and how much. These are key financial ratios and are usually calculated on a yearly basis. By scrutinizing such ratios for a company and then comparing it with others, will certainly help you in picking up the right stock.
ROE- Return on Equity
Minimum 10% return on equity is the ratio that reveals the net profit incurred by a company, after giving the shareholder’s equity. It is a very important financial ratio to examine, as it reveals how much you can earn as a shareholder. It helps you in at least predicting your profit, by simply evaluating a company’s ROE.
People deciding on the basis of their return on equity, should never pick stocks of a company having ROE below 5%. Companies having ROE more than 10% are the ones you should invest in.
EPSGR- Earnings per Share Growth Rate
It is estimated on an annual basis. At a particular frame of time, it is the incremental value of Earnings per Share. Stocks that have the highest value of EPSGR grow the most when compared with other stocks in the market. 10% EPSGR indicates that the company is growing, is in demand and is one amongst the best ones in its genera.
Now you must know where to invest in, right?
D/E – Debt to Equity ratio
It is the ratio that indicates how much is the company under the debt for ensuring that its functions are smoothly managed. It can be very easily calculated, just divide the total debt of the company by its total equity. This financial ratio indicates about the sensitivity of the stock and whether you should invest in or not.
After analyzing and evaluating the above mentioned points and financial ratios, you certainly find some good stocks to buy. But, you must understand that there is no sure shot formula behind picking the most worthy stock, rather there is an art behind it. Whosoever mentions that he has got a fail proof formula for picking the most profitable stock; then just avoids him, as he is lying.
Apart from the above mentioned crucial ratios and points that undoubtedly help you, there are some instinctive attributes as well, which affects your decision largely. Check out, they are mentioned below.
- Current market scenario
• Your personal instinct and choice
• Suggestions from experts and brokers
• Stock’s ability to tolerate risk
• The time period for your investment
Do consider all the aspects, as they are ultimately going to help you in picking up the right stock. These might appear to you as a very lengthy procedure, but in real it is not. Just like before making any other investment, you research and evaluate, you need to do something similar in this case as well.
To understand and comprehend ‘How to pick a stock’ is crucial, as it affects your wealth. No matter how rich you are, a smart investment always saves you from the horror of losing everything in a market crash.
Now that you are very well aware of almost all the major aspects of choosing a stock, all we can do is wish you good luck. Follow your instinct, sometimes it helps greatly. Trust what you see and have analyzed, never follow blindly anyone’s advice. Make yourself very well educated with this subject matter before you actually jump into it. Trust us, it is not at all difficult or complicated, it is just that people aren’t aware so they commit mistakes.
Since, you are now completely aware and sentient towards it, we expect you to choose the most ideal stock for yourself or for anyone else. Glance at this write up again, whenever you are in doubt. Remember, stocks can make you rich, only if you take risk and are alert.