Investing in stocks is one of the ways to build wealth but there are some factors that you have to consider before buying or investing in stocks.
Investing in the stock market is now one of the best sources of passive income. This is an effective way to build wealth and also a form of saving money.
However, there are several factors that you have to consider before buying a stock considering the market volatility today due to inflation rate, interest rate hikes, pandemic, and the current war.
In a published article on the website Wise Bread, here are 5 effective ways to know and determine if a stock is worth buying:
The rule of thumb in buying a stock is “buy low, sell high” and one way of doing this is to always look for the price of the stock you are eyeing. Look into its portfolio and analyze the movement of its price. When you evaluate the stock using its price, there is a big probability that you can buy a good value.
It is important to note that the growth of the company improves only if the revenue increases. In determining the revenue growth, you have to compare its revenue from one quarter to the other or its yearly revenue. Make sure that it has high upside movement potential.
The stock market today is very volatile and most companies are very vulnerable. One of the effective ways in buying a stock today is by investing in big companies with large market caps because they are diversified and cannot easily be affected by single bad news about the market.
Most companies have analysts who give reports about the current status of the company in the stock market. They recommend “buy” or “sell” ratings, but you have to be careful because they disagree oftentimes. So you also have to read other reports from other analysts.
You have to know which industry the stock belongs to. Today, tech stocks perform well because many businesses have already shifted and adapted the use of technology for their operation. But again, you have to do research and check its portfolio before buying a stock.
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