Stock markets, regardless of whether in the bull or bear phase, are always flooded with hot tips, buzzing stocks, and stock picks from different sources such as business news channels, websites, astrologers, friends, colleagues and other mass media sources. You must be one of the millions who are daily bombarded with SMS and Emails from known and unknown parties recommending you various stock investment ideas and wealth creation strategies.
Millions of people in this world have lost their hard-earned money in their passion to make quick bucks. Retail investors or small investors and the beginners are more likely to fall prey to hot tips and buzzing stocks. You could also be one of the millions who have wiped out their capitals by investing in stocks based on heard-on-the-street tips and multi-bagger ideas.
Investment in stocks demands sufficient research and disciplined approach. If you want to create wealth by investments in stocks, you should do proper homework before you buy any stocks. However, as a small investor, you might find it a daunting task to do an extensive research about the quality of management and the plans of the companies. Well, in the world of Internet, it has become extremely easy carry out your own research and check out the fundamentals of the stock. Here are few easy ways with which you can do your own research and choose the right stocks.
1. Check out the website of the company to know about its products, business models, management, and financial performance, past history, future growth, and latest announcements.
2. Keep an eye on the websites of Mutual Funds and large brokerage houses that publish the research reports of various companies after doing an in-house research on specific companies and sectors. Most of the research reports are generally accessible on the websites of large financial institutions and stock trading companies.
3. Check out the key performance indicators such as increase in revenues, increase in profits, return on equity, return on capital, dividend history, EPS (earning per share), current PE (price to earning) Ratio, industry PE, Price to Book Value Ratio etc. Compare all these indicators vis-a-vis the past quarters and years and with the numbers of industry peers. Most of the information is easily available on the websites of stock exchanges and companies.
4. As far as possible, you should stick to large cap companies. Due to the sheer size of the market capitalization, the risk of manipulative trading is minimal in large cap companies. However, if you intend to invest in small-cap companies, you must do sufficient homework about the background of the companies.
5. You may attend the AGM (Annual General Meetings) of the companies so that you can get the chance to talk to the management about the plans and clarify any individual doubts.
In the End:
If you want to protect your capital and create wealth, you should choose the right stocks and not bet anything and everything that comes your way. Depending upon the time horizon, you should have your own trading strategies in place before you buy stocks.
The Author is a Techno-Commercial Consultant and Freelance Content Writer. Get more info on Financial Awareness Portal
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