Things You Need to Know Before Buying Stocks
Everybody seems to be buying stocks, so you may feel compelled to buy a few to feel good about yourself. However, there is more to purchasing stock than thinking it should grow at its own pace into the future. Although about 56% of adults already own stocks, there are many things to know before making a financial commitment. Therefore, you shouldn’t do it because everybody you know is getting on board. Please read further to get a few tips before purchasing stocks.
How does the company make money?
Do you know how the company you’re buying stocks from is making their money? This is one of the first questions you should ask yourself before purchasing any number of stocks. First and foremost, by buying stocks, you are buying a percentage of ownership within the business. Therefore, you will automatically own a stake. For this crucial reason, you have a huge responsibility to know all you can about the company.
Fortunately, the internet holds a wealth of information, making it convenient to access it at any time. According to experts, the objective behind knowing how the company makes money is to help you feel secure about your investment. Secondly, it provides vital background information on the organization’s income generation streams.
For example, assuming you are interested in buying Disney stocks, you must know that their theme parks and cartoons make up only a third of total revenue. A bulk of their business revenue comes from its colossal media power and entertainment corporations. Fortunately, you can learn to trade stocks to get an in-depth understanding of the rudiments of the field.
Compare the company to its competitors
It is a wise move to compare the company you intend to buy stocks from and their competitors. Go further to compare their operations with others in the same industry. Doing this throws more light on their performance and how far ahead they are of competitors on the market. Moreover, experts say, taking the time to do this will help you determine if the stock you’re buying is cheap or expensive.
How fast is the company growing?
Assessing a company’s past and current performance can be a convincing reason to buy stocks. However, their performance trends may not necessarily remain consistent. The COVID pandemic proves why this is so. On a more positive note, however, a currently impressive growth can put the company in excellent stead for continued performance. To get it right with the company you’re interested in, you must evaluate their historical trends. This will give you a fair idea of how well they bounce back even after the market takes a dip.
The potential risk of losing money
Owning or buying stocks is not a haven. There is a considerable risk of losing money. The market can become volatile, causing shares to perform awfully. That is not to say that purchasing stock is a bad thing to do. On the contrary, knowing about the risks involved is recommended before jumping in the water with both feet. However, if you want to test the waters, buy stocks at a meager value and watch their performance on the market. Knowing beforehand that performance can swing either way is crucial to your peace of mind.
Want more great trading tips? 🤓
Check out these world-class trading leaders in their Remarkable podcast appearances now to learn how you too can trade confidently and increase your net worth before buying stocks that you may regret. Enjoy and please reach out to our guests for more info and training. Peace! ✌️
Jerremy Newsome | From Broke to Woke: Learning to Invest & Beating Alcoholism | Episode 57
Louise Bedford & Chris Tate Investing, Trading Secrets, & Personal Responsibility | E50
DISCLAIMER: This is an affiliate article. We post affiliate articles with the intent of helping you grow. They are not written, researched, or necessarily endorsed by our team. They are simply content submitted to us by what appears to be respectable affiliate sources, people, and organizations, which upon initial review, seem solid and helpful to our community, so we post them. It is up to you to personally verify the facts, links, organizations mentioned, the validity of the information presented, and any/all claims made in the article(s). To report an issue with any of the information, links, or organizations mentioned in this, or any content posted on our website, or if you simply have a question or need something we can help you with, please contact us now.