Friday, April 12, 2013

What to Consider When Investing in Stocks

Read our Terms of Service before reprinting this article. The submitter specified above has claimed the rights to this article.Chris Johansen

Selecting good stocks requires the investor to consider his or her long and short-term financial goals, research companies and their management practices, and create and implement a strategy to optimize their return on investment. Analysts have a number of theories and practices they use to make decisions on whether a stock is a “buy”, a “sell” or a “hold”. While every analyst and broker takes a different position, they all look at the same financial information and data.

When looking at a company’s main financial statements, which are the income statement and balance sheet, pay close attention to the following areas. They are a good indication of the company’s overall financial health.

‧ Earnings: You should look at a company’s earnings. Ideally, the number should be ten percent higher than last year. Earnings are a good indicator of a company’s growth and growth potential.

‧ Sales: Sales should increase every year. If sales fail to increase, you may be looking at company on a downward swing.

‧ Debt: Companies on solid financial footing should be actively paying down their debt. If earnings and sales are up, debt should be down.

Good stocks are reflective of a company’s overall management strategy as well. There are a number of financial ratios you should explore and consider before purchasing stock and investing. These figures give you an idea about the company’s long term growth and performance.

‧ Price to Earnings Ratio (P/E)

‧ Price to Sales Ration (PSR)

‧ Return on Equity

‧ Earnings Growth

‧ Debt to Asset Ratio

All of these facts and figures should be available in the company’s prospectus, annual report and Security and Exchange Commission (SEC) filings. For penny stock and other off market stocks, you will need to do a little extra digging, as the SEC does not hold these companies to the same filing and listing standards as other companies.

Only you (and your broker) can decide what stocks are right for your investment strategy and financial goals. Good stocks will earn you money over time, and can withstand some of the market’s more volatile turns. Companies that provide goods and services people want are usually profitable. Surveying the products in your own home can help you identify some of the companies you may want to invest in. If your family is purchasing these things, there’s a good chance your neighbor is as well.

Diversity is key to picking good stocks. You should chose companies which represent different areas, sectors and industries. While you may be using a broker to manage your portfolio, you should keep yourself informed and up to date on market trends and your own positions ion certain stocks. Staying focused on your long term goals rather than the short term gains and losses will help you withstand the ordinary ups and downs of the market. Good stocks can be found- and purchased – at every price point. Once you have a clear idea of what you want to gain from your transaction, you can easily find the right stock opportunities to suit your needs.

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More Related Article InformationAuthor → Chris Johansen | Joined: October 13, 2010 | From: United States Article SectionFinances | Published: March 17, 2013MLA Style Citation:
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Article Tags Defined
Definition of the Term: Financial

1. involving financial matters

1. moral excellence or admirableness

?? 1 → There is much good to be found in people

2. that which is pleasing or valuable or useful

?? 1 → Weigh the good against the bad?? 2 → Among the highest goods of all are happiness and self-realization

3. benefit

?? 2 → What's the good of worrying?

1. having desirable or positive qualities especially those suitable for a thing specified

?? 1 → Good news from the hospital?? 3 → When she was good she was very very good?? 4 → A good knife is one good for cutting?? 5 → This stump will make a good picnic table?? 10 → A good dress for the office

1. (often used as a combining form) in a good or proper or satisfactory manner or to a high standard (`good' is a nonstandard dialectal variant for `well')

?? 8 → The baby can walk pretty good

2. in a complete and thorough manner (`good' is sometimes used informally for `thoroughly')

1. promoting or enhancing well-being

?? 1 → An arms limitation agreement beneficial to all countries?? 2 → The beneficial effects of a temperate climate?? 3 → The experience was good for her

2. having the normally expected amount

3. with or in a close or intimate relationship

?? 2 → My sisters and brothers are near and dear

4. thorough

?? 2 → Gave the house a good cleaning

6. exerting force or influence

?? 1 → The law is effective immediately?? 2 → A warranty good for two years?? 3 → The law is already in effect (or in force)

7. resulting favorably

?? 1 → Its a good thing that I wasn't there?? 2 → It is good that you stayed?? 3 → It is well that no one saw you

10. tending to promote physical well-being; beneficial to health

?? 1 → Beneficial effects of a balanced diet?? 3 → The salutary influence of pure air

11. in excellent physical condition

?? 3 → A sound mind in a sound body

14. most suitable or right for a particular purpose

?? 1 → A good time to plant tomatoes?? 3 → The time is ripe for great sociological changes

16. deserving of esteem and respect

?? 1 → All respectable companies give guarantees?? 2 → Ruined the family's good name

17. of moral excellence

?? 3 → An upright and respectable man

18. having or showing knowledge and skill and aptitude

?? 7 → A lesser-known but no less skillful composer?? 8 → The effect was achieved by skillful retouching
Definition of the Term: Growth

1. the gradual beginning or coming forth

?? 1 → Figurines presage the emergence of sculpture in Greece

1. vegetation that has grown

?? 2 → The only growth was some salt grass

1. (biology) the process of an individual organism growing organically; a purely biological unfolding of events involved in an organism changing gradually from a simple to a more complex level

?? 1 → He proposed an indicator of osseous development in children

2. a progression from simpler to more complex forms

3. a process of becoming larger or longer or more numerous or more important

?? 1 → The increase in unemployment

1. (pathology) an abnormal proliferation of tissue (as in a tumor)

Definition of the Term: Number

1. an item of merchandise offered for sale

?? 1 → She preferred the black nylon number?? 2 → This sweater is an all-wool number

2. the property possessed by a sum or total or indefinite quantity of units or individuals

?? 1 → He had a number of chores to do?? 2 → The number of parameters is small?? 3 → The figure was about a thousand

1. the grammatical category for the forms of nouns and pronouns and verbs that are used depending on the number of entities involved (singular or dual or plural)

?? 1 → In English the subject and the verb must agree in number

2. a numeral or string of numerals that is used for identification

?? 1 → She refused to give them her Social Security number

3. the number is used in calling a particular telephone

4. one of a series published periodically

?? 1 → She found an old issue of the magazine in her dentist's waiting room

5. a symbol used to represent a number

?? 1 → He learned to write the numerals before he went to school

6. a short theatrical performance that is part of a longer program

?? 1 → He did his act three times every evening?? 2 → She had a catchy little routine?? 3 → It was one of the best numbers he ever did

1. a select company of people

?? 1 → I hope to become one of their number before I die

1. a concept of quantity derived from zero and units

?? 1 → Every number has a unique position in the sequence

1. place a limit on the number of

1. enumerate

?? 1 → We must number the names of the great mathematicians

2. determine the number or amount of

?? 1 → Can you count the books on your shelf?

3. give numbers to

?? 1 → You should number the pages of the thesis

1. add up in number or quantity

?? 1 → The bills amounted to $2,000

2. put into a group

?? 1 → The academy counts several Nobel Prize winners among its members
Definition of the Term: Stocks

1. a former instrument of punishment consisting of a heavy timber frame with holes in which the feet (and sometimes the hands) of an offender could be locked

2. a frame for constraining an animal while it is receiving veterinary attention or while being shod

3. a frame that supports a boat while it is under construction


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