Almost any stock market article you will find regarding introducing new investors to stock trading will tell you to do research before you get started. Have you ever wondered, “What am I supposed to research?” After all, if you’re just beginning, you probably don’t know enough about the stock market to even start doing a good job of researching anything. This article will give you pointers as to how to start your research and the different areas of research you need to educate yourself about.
Let’s start by saying that although some of the articles make it sound like doing research is an easy job, it’s actually very complicated. The Internet is full of sites that all claim to give you the best information regarding the stock market. Let’s face it. Learning the stock market is confusing enough in its own right without having someone try to feed you a load of goods. By sticking with websites of companies you know and trust, you’ll be able to know you’re getting the right information.
The first thing to do when you start researching is to look at both stock prices and the companies which are offering them. I’m sure you’ve seen stock index pages in the newspaper, and that’s as good of a place to start as any. Read down through the prices and try to spot some companies that you know. Compare the prices of the various stocks to your budget to see if the possibility of your buying the stock is even feasible given your financial situation.
Once you’ve zeroed in on a few companies, the next step is to do specific research about each company. What kind of a reputation does the company have? How reliable are they? Do you approve of the business practices employed by that company? After all, when you buy stock in a company, you actually become a partial owner of that business. Are you going to feel comfortable knowing that the clothing company you are a part of uses overseas sweatshop labor to make their clothes? You need to find companies that are a comfortable fit for you and your lifestyle.
To do your research, find articles in the newspaper that talk about the company. Look at online review sites. Also study the company’s website carefully to see what all you can learn. How large is the company? The most stable stocks are those put out by larger companies. You’ve probably read about the way large companies devour the smaller ones to avoid competition which often makes smaller companies more risky to invest in. True, stocks from larger companies are more expensive, but it’s better to own a few shares of a more stable company than it is to own a lot of shares in a company that’s about to go belly up or sell out.
You’ll want to consider the length of time the company has been in business. As a general rule of thumb, a majority of new companies close within a year of opening which would leave you, the stockholder, high and dry. Look at a company’s record over the years. How well has the company been able to withstand depressions in the economy? Consider the company’s profit history and the satisfaction level of investors before deciding to invest.
As you can see, there are a lot of things you’re going to want to know before you can make any type of informed decisions about investments. Although there are online sites that offer to evaluate companies for you, it’s always best if you do your own research and make decisions based on what you yourself have learned. Taking the easy way out may not be the most profitable thing you can do.