Stock Analysis – 5 Major Factors to Analyze for Better Investment


Equity investing is one of the biggest investment sectors in today’s environment. From the layman to the wealthy, we see everyone investing in stocks of different companies. But does that really mean that the stock market is an easy place to make money? NO!

You may be surprised to know that only 10% of investors make a real profit in the stock market while 70% remain indifferent and the rest bear huge losses. So many leave and others wait for the makeshift bell to ring. But that’s not what a professional does.

Stock analysis: 5 major factors to analyze for a better investment:

Analyze your psychology:

A stock chart is nothing more than a picture of human emotions. Painted on the canvas are the emotions of greed, fear, hope and euphoria. As a disciplined trader, you capitalize on the psychological demons that plague other traders. Thus, your psychology plays a vital role in making gains and losses in the market. Taming your mind is the first and most important thing you need to know before investing in the market. And taming your mind comes from better plans.

If you are going to invest, we want you to do it as a professional. Make your own plans and stick to them. Stocks make many minor corrections, but immature investors fear the crash and sell at a huge loss. It’s only because they had no plan.

Analyzing the perfect broker:

Analyzing and choosing the best broker according to your needs is not an easy task. If you are new to share market, you might not know that online brokers are categorized into two major groups as their function varies from each other.

Full-service broker:

Full-service brokers are those who offer you better advice on your investments and better plan your retirement. So, if you are considering a long term investment, you need a full service broker.

Discount Broker:

Discount brokers like Ameritrade will offer dramatically reduced fees and commissions, but they don’t offer any kind of advice on what stocks to buy or how you’re going to retire in 10 years. You are alone! For swing trading and day trading, your best option is to use a discount broker.

Payments and commissions:

In addition to the commissions charged for your transactions, you may be charged ECN (Electronic Communications Networks) fees. Other fees may include market data fees. These fees may be charged for accessing the data that powers your software application. You will need to check with your broker for their specific fee schedule.

Analyze money management:

Money management is the crucial part of the stock market. Investing in stocks and managing your profits and losses with the market price is something every investor should be familiar with. One of the Pro ways to manage your money is 2 for 1 management. If you are new to stock trading, this will help you stay alive through the learning curve. This money management strategy will help you maximize your profits while minimizing your losses.

Suppose you buy 500 shares of a stock at $35.00. You determine that your stop will be at $34. You risk $0.1/share. Now, if the stock plays in your favor, you will withdraw your profit at $36 and leave your stop loss on the remaining stocks at $34. What does it mean? Well, you have taken a partial profit on half of your stock once the stock has moved evenly to your original stop loss positions. Now, if you are stopped on the remaining actions, you won’t have lost anything.

So, by removing half of your shares from the table, you have offered yourself a “free trade” (minus commissions). Assuming the stock doesn’t drop overnight, you can let the stock run.

Balance sheet analysis:

Analyzing the balance sheet of your invested company is very important and it is the most. Without a good knowledge of the financial situation of your company, we suggest that you avoid investments. The data provided in the financial report shows the financial stability of your business. Data such as: issued capital, reserve, profit, invested sectors, debit and credit column, liabilities and assets of the company, etc. are important factors that affect the market price of the company.

In addition, the goodwill of the company and the reputation of the owners and CEOs of the company should also be noticed before investing in the stock. For this, you can get advice from brokers, and even your friends who have been in the market for a long time can help you.

Analysis of political conditions:

The political condition of the nation has a direct relationship with the stock market, as the stock market is not only a place of earning, but it also determines the economic developments and stability of the nation. Any riot, terrorist activity or strike with major issues can impact the market.

Thus, before investing, we suggest that you make a better analysis of the political situation and the government or the ruling party, because the plans and policies brought by the ruling party may discourage or encourage the stock.

Source by Kiran Bista

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