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Choosing Stock: A Beginner’s Guide

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A lot of people toy with the idea of getting involved in the stock market, but they struggle to know where to get started in what can seem like a complicated and daunting field. The internet has helped to simplify the process, and there is now so much more advice and tools out there than ever before. To help you on the road, here is a brief beginner’s guide with four pieces of advice designed to help you simplify this field.

Decide on Your Investing Goals

Before you do anything more, you need to decide what your investing goals are in the first place. Perhaps you are looking to save for retirement or your children’s college fund. Maybe you are looking for a second income stream or you simply want to preserve the money that you already have. Your goals will depend very much on your own life situation, but it is worth getting these clear in your head before you go any further.

Learn the Basics of Stocks

The stock market seems very intimidating if you have never had any experience of it. To start off with, it is worth learning a bit of the jargon to lessen your feelings of confusion. For example, the P/E ratio refers to price-to-earnings – this is all about how much investors are paying for every dollar of profit. Revenue growth is all about the total sales of a company over a given period of time. Then you have the dividend yield which refers to the annual dividend payout divided by the stock price.

Choose a Sector

Next up, you can choose a sector to invest in. Many people choose to go for areas that they are especially interested in. For example, if you have an interest in restaurants, you could for food and drink stocks. Of course, familiarity alone isn’t everything. It is a good idea to understand the underlying business so you can make more informed investments. However, ‘buy what you know’ is probably a good mantra to have when you are first starting out making investments.

Bring Everything Together

Now is the time to bring everything that you have learnt so far together. It is a good idea to look for businesses with powerful brands that people are naturally drawn to. Other important factors include a history of success, popular products, and anything else that gives that company a sustainable competitive advantage over their rivals. Start off small in the stock market to build up your experience and ensure you are comfortable with the way things work. Check out this stockpile review if you want to get involved this way. Over time, you should be looking to diversify the investments that you make so that your risk is lessened over time.

Hopefully, this guide has made the stock market seem that little bit less daunting and more accessible. Essentially, you need to take the time to learn as much as you can and ideally speak to people who are experienced in the field.

Photo: Pexels

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