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5 Important Factors of Stock Research and How to Trade Effectively

Publish date: Tue, 29 Dec 2020, 08:31 PM
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General investment news and blog posts

Stock research may seem overwhelming for a first-time investor, but conducting thorough research, whether you’re going to be working with an investment professional or not, is an important part of the entire process of investing.

When you invest in stocks in a company, you buy a piece of ownership of that company. If you spend hundreds of hours deciding what brand and model of mobile phone to buy, wouldn’t it be more prudent to spend the same amount of time, if not more, picking the right company to trust your future with? Owning a piece of the company means having a personal stake in the business.  

Stocks are long-term investments. With stock prices fluctuating daily, you are likely to see any good return on investment (ROI) only after a long period of time.

If you want short-term profits, then that’s when you trade stocks. Stock trading is buying and selling stocks in order to take advantage of daily stock price fluctuations. The goal is to make profits in an hour, a day, or a month instead of years, which is typical of buying and holding stocks for years as an investment so you can sell them later or not at all.

This post talks about five factors you need to consider when you’re evaluating stocks to invest in or trade immediately to make profits.

Fundamental and Technical Analyses

Investors have a name for the type of analysis they do when picking stocks. Let’s look at these types of research and understand how they differ from each other.

  • Fundamental Analysis

Fundamental analysis refers to the intrinsic value of the stock. Fundamental analysts look at the company's industry potential, the company's leadership and management, the company's revenues, and the profit margins.

  • Technical Analysis

Technical analysis deals with all the technical info available on the company, such as pricing information and trading volume.

Technical analysts don't really look at the relationship of prices of stocks with monetary policies or economic changes. They believe that prices follow a pattern and they analyze these patterns to figure out the period of uncertainty and volatility, and judge from there the best time to trade.

If you don’t have the time or the inclination to look at volumes and volumes of numbers, go for the fundamental analysis of stocks.

One of the best tools to help you buy and trade stock successfully is the WallStreetZen's free stock screener. Rated as the best stock research website in 2020, the site looks at thousands of financial data of a company, and interpret those data in a way that non-finance professionals will understand.

Here are the five factors to consider in any analysis: 

1. Dividends

A high dividend payment is a sign of a financially healthy company. Companies generally report their dividends. You can find it on their cash flow statement or even in press releases.

2. Price/Earnings (P/E) Ratio

The price/earnings ratio is the relationship between a company's stock price and earnings per share. It is calculated by dividing a business’ stock price by its EPS.

Because a P/E ratio is a good indicator of a stock's value, some investors use it as an investment strategy.

3. Beta

Beta measures the volatility of a stock as it compares to the market as a whole. A higher beta means higher risk but also higher expected returns.

4. Earnings Per Share (EPS)

EPS indicates the company's profitability. It is calculated by dividing a business’ net income by the number of outstanding shares.

5. Historical Returns

Historical returns refer to the past performance of a stock. Investors use this to predict and estimate future returns.


Today, there are stock analysis sites you can use as a beginner investor to get your feet wet and learn the trade slowly but effectively.

Website research tools can help you pick potentially good stock investment, but you’ll be a better investor if you make some effort to learn the terminologies, what each data represents, and even learn to analyze the data yourself.

Read up everything you can about the stock market, stock risk analysis, stock trading, and other financial articles.

Practice trading virtually, if short-term profits are what you’re after. There are virtual stock trading market tools and sites that simulate a real stock market so you’ll get a feel of how a real stock market works.

This is also a good place to try out investment strategies. Just don’t forget to analyze your moves and learn from your mistakes.

Once you think you’re ready, find the right broker, and switch to real money in a real stock market.

Don’t wait for a perfect time or a perfect point where you’re sure you’ve learned everything. As long as you’re comfortable that you know enough, take the plunge. Just remember to start small and start safe. Good luck!


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