How to Buy Stocks – Getting Into The Stock Market
Today numerous people from various financial backgrounds are buying stocks. Buying stocks is a very complicated process which is more often than not financially rewarding. But, not all people know how to buy stocks efficiently, and when you go in without the proper knowledge, you may get burnt. Here are three steps which will help you to invest your money in the most profitable stocks. Keep in mind that purchasing stocks is a great way to move towards retirement. I recently published a post on that that you can read here. If you aren’t interested in reading, you’re in luck! Here is a great video by Trading 101 on how you can buy stocks.
1.Research the markets well to find diamonds in the rough
Find a company with good profit margins, fair equity returns, low debt to equity ratio and stable growth. The easiest way to find a company that is worth your investment is through the specialized websites or newspapers like the Wall Street Journal, Stockchase.com or Investor’s Business Daily. Through these specialized websites you will find the least volatile and most profitable companies. Most importantly these publications will give you resources through which you will be able to gain knowledge about the process of buying stocks like shares of stocks, exchanges, supply and demand of stocks, stock prices and the opinion of the investment community of the stock.
It’s important that you get familiar with the terminology of stock trading. Research about terms such as ask price, bid price, a market order and sell price. This will enable you to be more skilled in your decision making. If you find a company whose sales and profits are increasing you will be able to sell your stocks after a certain period of time with a profit. After this research is completed you will have the knowledge and ability to research the financial indicators of the company whose stocks you are planning to buy.
2.Find stocks with the right financial indicators
Since you will be familiar with the terminology and financial indicators of stocks, you will be able to choose stocks whose financial indicators will be suitable and profitable. Buy stocks from a company that has a steady profit margin and an increasing growth. But, besides profit margins and growth there are other equally important indicators such as the company’s debt, its equity returns or its debt – to – equity ratio. Although the profit percentage is very important for both the company and for investors, what is most important for someone who wants to buy their stocks is the company’s return on equity. If a certain company invests the received money from shareholders to increase its profit, the shareholders will also increase theirs. But, what is perhaps even more important is how much debt a company has and in which way it is managing it.
You can analyze whether a company has sustainable levels of debt through the debt – to – equity ratio. Chose a company with a lower debt – to – equity percentage and then compare it with other companies numbers. After you analyze all these components analyze the price – to – earnings ratio. This ratio will give you a comprehensive representation of the annual gain you will receive per stock. Buy stocks from a company whose stock price is cheap in relation to the earnings you will receive.
3.Buy the stocks directly or through a suitable broker
Certain companies provide direct stock acquisition without a broker. This is a very fitting approach for someone who isn’t buying a lot of stocks. You will save not only time but also the commissions that come with using a broker. You can find these companies online if that approach is the easiest for your investment plans. It is also important to be careful about the fees of a stock. Try to find companies that don’t have fees or companies whose fees are lower. The dividends you will receive will depend on the profit of the company, and what that company chooses to issue. I’ve got a great review for you lined up here with my broker of choice. Head to this review of Questrade if you’re interested in learning more.
If you can’t or don’t want to buy the stocks directly from the company, find a suitable broker. If you are buying lots of stocks it may be worth it to pay a fee to a brokerage firm for peace of mind and convenience. There are lots of discount brokers available too which will lessen your commissions and increase your returns.