Stock Investing: Decision is Yours

Investing in the stock market has always been an exciting affair. It offers you a bouquet of opportunities to earn money. And the income earned through stock investing can be utilized for debt relief also. Moreover, it has been historically proved that over the long run, stock market returns outweighs any other form of investing. However, you should not expect outright result.

Before investing in the market you should acquire basic knowledge about finance as well as you must be in a position to understand the financial statement of a company. Only this will enable to take a wise investing decision. Moreover, it requires a patient and unemotional approach to achieve success in stock market investing. In the world of investing, as a thumb rule, it is said that you should not invest all your money in a single stock. Rather, you must diversify your portfolio into various investing avenues. This will provide you much needed protection from erosion of money.

Before investing in the stock market, you should be well aware of fundamental analysis and technical analysis. Through fundamental analysis you can get an idea about the intrinsic value of a stock. It is about analyzing the financial statement and balance sheet of companies. The key financial parameters which are used for fundamental analysis are price per earning (P/E), earnings per share (EPS) and projected earnings growth (PEG). Fundamental analysis is helpful to make the decisions to buy or sell stocks. On the other hand, technical analysis involves mathematics and charts to find out the ideal time to buy or sell stocks. In technical analysis, the fundamentals of a company are not taken into consideration. Instead, demand and supply pattern of stocks are used to get an idea about the future movement of stocks.

Technical analysis is used to get an idea about the short term movement of stocks whereas fundamental analysis deals with the long term movement of stocks. Before entering into the world of investing, it is advised that you must have proper understanding about fundamental and technical analysis.

Once you have acquired knowledge about the two above discussed schools of stock analysis, it is the time to adopt basic stock investing strategies.

Investing in penny stocks

Penny stocks are the stocks of small companies with very low values. Penny stocks have tremendous upside but these stocks can also plummet appreciably any time, mainly because lack of information available on these stocks.

Investing in small caps

These stocks have values more than that of the penny stocks but less than that of the mid cap stocks. The small stocks have also tremendous upside but there are high risks too. But on an average, the risks involved in these stocks are comparatively less than the risks involved in penny stocks.

Investing in mid caps

The mid cap stocks have huge growth potential but the risks associated with these stocks are less as the companies who issue these stocks are more established. These stocks may have the potential to become future large cap stocks or these stocks can also be the former large cap stocks.

Large cap investing

Large cap investing is touted as the viable long term stock market investing strategy. Generally, these stocks grow at a slow pace but steadily. Since the companies which issue large cap stocks are no longer in the stage of infancy, the rate of growth of the stock price is less. Due to slow growth in the stock price, many companies offer to pay dividend to the shareholders.

These are the some basic investing strategies that you can follow. However, your specific investing strategy will depend upon several factors such as your income, risk tolerance and of course on your knowledge about stock investing.

Jason Holmes is a regular financial writer associated not only with Debt Consolidation Care but also with other financial websites. He is an expert with immense knowledge on the various aspects of the debt and credit industry. He has written numerous financial articles based on debt relief and credit problems and solving those and there are some e-books in his name with the likes of “My Story- From Depression To a Smile”, “Credit Score The Quintessential Therapy for a Happy Pocket” and so on.

Leave a Reply

Your email address will not be published. Required fields are marked *