A stock market is the collection of markets and exchange where activities of buying, selling and giving out of shares of publicly held companies take place. While both terms stock market and stock exchange are used interchangeably the latter term is generally a subject of the former. So stock market books are ideas and knowledge that helps investors get some popular investment ideas, risk reduction and gain increase skills, also spotting the best stocks. Some investors lock in profits by selling their appreciated investment while holding on to under performing stocks they hope will recover from prior negative activity such as loss. But good goods can climb further and poor stocks risk dropping completely. When learning about the stock market books you may consider some key points, and they are as follows.
Focusing on the future, it is so important to be informed when making investment decisions, based on the things that are yet to happen. Past data can show things to happen although it’s not promised. Invest in what you know; an investor can perform well by getting to know an organization, its business structure and its fundamentals. Investors should invest for the long run; an investor can invest $1, 000 on the high day of the year for 30 years that investor would have earned a compound return I. E the ability of a sum of money to grow steadily over time by the repeated additional earnings to the first invested of 10% for the period. If another also invests the same amount a year every year for the same period on the lowest day of the year this individual would earn an 11% compounded return over the same period.
Company performance, some times Return on Equity (ROE) or stockholders return on investment (performance measure is used to know the efficiency of an investment). It is used to see whether there is a good consistent performance as compared to other competitors in the same industry. This is calculated as ROE=Net income/ Share holders Equity(SE), you should look at the ROE for the past ten years to know historic performance.
Profit margins; profitability is not only by having good profit margins; represents what percentage of sales has turned into profits. But a constant increase for a good indication of historical profit margin, records should date back at least five years. Is the company public? Investing requires looking at companies that have stood the test of time; this indicates its ability or inability to increase shareholder worth. Its value delivered to the equity owners of a corporate due to management’s ability to increase sales earning which leads to an increase in capital gain.
Margin of safety; relays on buying stocks at a slightly lower price to give you a better chance at earning a profit later when you sell the product. In addition, it makes you less likely to lose money if stock doesn’t perform as you had expected. Don’t stress over small loses; rather than panic over an investment’s movement in a short time, it’s better to look at its big picture trajectory. Have confidence in its bigger tale, and don’t be swayed by short period gains. Resist the lure of low priced stock; some mistakenly believe there’s less to lose with cheap stocks. Regardless, whether a $5 stock drop to $0 or a $75 stock does the same, you have lost 100% of your first investment.
Pick a method and stick to it; it’s important to stick to one philosophy. Moving between different approaches makes you a market opportunist/timer, a dangerous territory. It is the act of moving in and out of a financial market or switching between asset classes based on predictive methods. Be open to ideas many great companies are popular, but many good investments lack brand awareness. Furthermore, thousands of smaller companies are capable of being the big names of tomorrow. Commodity reliance; any characteristic that is hard to duplicate is a unique advantage a company has over its competitors which allows it to protect its market shares and profitability. Therefore, the tougher it is for a competitor to gain market share.
Scarce supply with strong demand for a stock creates excess demand; this is environment in which stock prices can rise. Companies getting back their stock reduce market supply and can show their expectation for increased demand. Don’t chase hot tips; regardless of the source, never accept a stock tip as valid. Always do your personal research before putting in your money. While tips some time pan out, long period success demands thorough research.
Be concerned about taxes, but don’t worry; putting taxes above all else can cause investors to make wrong decisions. While tax involved are important, they are secondary to investing and safely growing your money. As you work to reduce tax liability, archiving high returns should be the primary goals. Measure of the intrinsic value it is a measure of what an asset is worth; by looking at a number of business fundamentals including earnings, revenues and assets. This figure is usually higher than its liquidation (process of bringing a business to an end and dividing its assets to claimants), which is what a company will be worth if it were broken up and sold. The worth doesn’t include the untouchable such as the value of a brand name, the intrinsic worth of an organization as a whole should be compared to its current market capitalization this is the current total worth price.
If the value measurement is at least 25% higher than the capitals market capitalization, it is seen as one that is capable. Company dept; the dept ratio to its equity (D/E) is a measure of the level to which a company is paying for its operations through dept versus wholly owned funds. These numbers are available on the balance sheet of a company’s financial statement, is a key characteristic to consider carefully. The ratio is calculated as follows: (D/E) =Total Liabilities / (SE). A higher dept level compared to equity can result in low earnings and larger interest expenses that is the cost of an entity for borrowed funds. For a stiffer test, investors some times use only the debt that matures in more than one year Instead of total liabilities in the calculations above.