Basics of Successful Equity Investing
With economic data getting better every day (or at least less dreary), now might make the most sense to start investing in the equity markets. By following these basic strategies, you can improve your probability for success.
1. What is the Price-to-Earnings Ratio for the security in question? Finding out what the PE ratio for a security is allows investors to determine how much revenue each dollar they invest generates for the company. Obviously, the lower the PE ratio, the cheaper the stock price. This ratio can be used to determine how expensive a stock price is relative to comparable securities.
2. Know the debt-to-equity ratio for the security in question. This ratio allows investors to determine how much debt a company owes for every dollar in equity they own. The higher the ratio, the more debt the company has to repay. In difficult times, debt-to-equity can often predict solvency issues. Since this ratio will vary from industry to industry, make sure that securities are compared within the same industry, otherwise the comparison is worthless.
3. Find out what Professional Analysts feel about the stock in question. Since most public companies are reviewed by investment houses for possible inclusion in their own portfolio, these companies will often publicize their recommendations. These recommendations will vary, but will be either Buy, Hold or Sell. Finding out what the pros think about a particular security can provide further confirmation of a position that an investor is looking to take.
These three tips are starting points for many investors. Although the list is nowhere near being all-inclusive, investors who take the time to find this easily available information will find they are making smarter trades over the long-term.
As an alternative, investors who prefer a hands-off approach to their investment accounts should consider mutual funds. This puts the onus of proper research on the shoulders of the mutual fund company and not the investor. - 23218
1. What is the Price-to-Earnings Ratio for the security in question? Finding out what the PE ratio for a security is allows investors to determine how much revenue each dollar they invest generates for the company. Obviously, the lower the PE ratio, the cheaper the stock price. This ratio can be used to determine how expensive a stock price is relative to comparable securities.
2. Know the debt-to-equity ratio for the security in question. This ratio allows investors to determine how much debt a company owes for every dollar in equity they own. The higher the ratio, the more debt the company has to repay. In difficult times, debt-to-equity can often predict solvency issues. Since this ratio will vary from industry to industry, make sure that securities are compared within the same industry, otherwise the comparison is worthless.
3. Find out what Professional Analysts feel about the stock in question. Since most public companies are reviewed by investment houses for possible inclusion in their own portfolio, these companies will often publicize their recommendations. These recommendations will vary, but will be either Buy, Hold or Sell. Finding out what the pros think about a particular security can provide further confirmation of a position that an investor is looking to take.
These three tips are starting points for many investors. Although the list is nowhere near being all-inclusive, investors who take the time to find this easily available information will find they are making smarter trades over the long-term.
As an alternative, investors who prefer a hands-off approach to their investment accounts should consider mutual funds. This puts the onus of proper research on the shoulders of the mutual fund company and not the investor. - 23218
About the Author:
MutualFundSite.org is an informational website that shows people Where To Invest and also helps people Learn To Invest properly.
posted by X - Men @ 6:00 AM
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