Wednesday, April 6, 2011

Investing In The Stock Market: How To Get Started

By John Luther

In the world we reside in today there's no lack of access to investment info. This in itself nevertheless can be a large problem. Asking questions about the way to invest, where to invest, and what to go looking for, can bring you many answers from heaps of different sources. The trouble is diving thru all of the mess to find topical information to suit your wishes.

So when looking to invest in the stock market, where should you start?

Important things first, invest in what you know. If you're making an attempt to guage an enterprise confirm you know how it functions. The great Warren Buffett has always been criticised for not making an investment in technology in the dot-com boom. His reply was easy. If you do not know the enterprize model, what the company does on a day to day basis, or how it generates income now, and in times to come then avoid it. It's often because of this that he has earned many billions of greenbacks year on year for himself and his speculators.

Once you know the types of companies to look for, you'll need ideas. Message boards, newsletters, financial news shows, and stock screeners are all good places to find ideas. Stock screeners are especially useful, because in addition to finding ideas, you can narrow the search down as you go to fit your qualifications.

So you have found some corporations worth looking into, what next?

1. Insider trading -- This is anyone who is considered to have an inside knowledge of the company, and also has money invested in company stock. This could be someone who owns 10% or more of the company, a director, CEO, CFO, etc. Watching when the insiders buy and sell stock, and at the prices they do it, can be very useful in predicting a stocks future. You don't want to buy a large stake in Company X when all the people running it are getting out. Therefore it's always a good idea to watch what the "smart money" is doing.

2. P/E ratio -- The price to earnings ratio can also be a useful tool in evaluating a company. The P/E ratio will tell you if the company is relatively undervalued, or overvalued. A company that is undervalued should have a P/E ratio that is lower than other stocks in their sector. This is a great value to plug into a stock screener to find profitable companies.

Note : P / E can be manipulated ( think Enron ). Also P / E proportions vary significantly relying on the sector you're looking in. Tech shares might have a standard P / E proportion of sixty, while oil corporations might have a median P / E proportion of ten. Whenever I judge a stock, I do not look at the P / E against all the other firms, but I look at it against their competition in the same sector.

3. Technical research and charts -- This is another tool that will help you see where a company has been, where the company stands now, and where it's headed in days to come. It shows the company in a graphical form where you can see the stocks activity and volume over some time.

4. Management team -- some individuals just look at takings, charts, and other technical tactics of assessing an enterprise. This is not always a bad thing but to truly know about a corporation you really ought to know the management. You really should know what other corporations they've been concerned with during the past, and how they did when they were there. You need to also know where they intend to take the company you are gauging, and in what length of time they have allotted to get there. It's kind of like judging a sports team. You would not pick a championship team without having a look at the training staff.

These are a couple of the techniques to find corporations to take a position in. Like with anything though , due your homework, write out your goals, and when doubtful, ask for information from someone that has accomplished what you are endeavoring to do. Data is the secret to being successful at almost anything.

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