We have always been confused when we buy stocks because we always think about losing because there are many stocks seem to be with good rates but after buying it you find it fall down.
Today we are going to enlighten you with the best way to buy stocks, we always recommend you to figure out the company that you are going to buy stocks from, and try as much as you can to get more information about it as this information is the clue and also will tell you to avoid or buy.
Try to focus on the company that has a good history in the stock market and avoid the small and new companies, but it is not a basic rule because there are many small companies that you can buy its stocks and make good profits, but it’s all about the information.
Let me tell what you have to do, there are many investors focusing on value and others focus on growth of the stocks, from my point of view you can use long-term strategy as you can buy profitable stocks and freeze it, and I don’t mean freeze for weeks or months I mean for years, after its value raised up high you can sell it and get paid so high.
Things you should see during your researches:
To buy the best stocks need to do the best research about the company and many other factors such as:
1- P/E Ratio (Price Earnings Ratio):
This factor is one on the most important factors that will help you to make the right decisions and the first thing you have to calculate before buying stocks.
For instance, if the stock price is 500$ and the company’s profits for the last year is 50$, so
P/E =stock price / company’s profits
500$ / 50$ = 10 is the price earnings ratio.
This is the easiest basic equation to calculate the P/E Ratio of any company, you can take a time to investigate the companies and compare it with others to find the best stocks.
2- EPS (Earnings Per Share):
EPS is the second important factor that we can’t neglect, as it the money that company pays for its stocks.
You can follow its net profits and find how much it pays for stocks owners, search for the EPS every year and figure it out, always compare its profits for the current year and the previous years, and ask yourself is its net profits raised, still the same or not?
After answering this question and calculating the P/E you can make the right decision.
3- ROE (Return On Equity):
If you think about technology industry companies and you believe in its stocks, put into consideration that there are many companies has the same industry and you have to compare them first.
Always check the reports that the companies give, and also the income statement and analysis its net profit.
Although these steps above is very useful and tested but we can’t say that it is a basic as there are many factors may effect on the stock market.