It is essential to do the homework before plunking down your hard-earned money on a company’s stock, which many people fail to do. In particular, new investors tend to be tepid while investing in a stock or we can say, getting started could be rather intimidating for the newbies. It will be difficult for them to determine how much money to invest, what type of stocks one should look for and how to avoid the common ‘rookie mistakes’.Carefree investing style doesn’t work all the time.So, it is important and safe to consider the following factors in mind before making the first purchase.
Click here to investigate why price should be considered as an important factor while making an investment decision. No matter, whether you are buying a stock, mutual funds, cryptocurrencies or investing in real estate, the price you pay determines whether it is a winning bet or a losing bet. For instance, let us say, that you are looking for a perfect winter coat.You visit pimkie and got a nice coat at an offer price of $250. You are pleased with your purchase because it is beautiful, suits you well, but your budget and lasts long. Once you get home you talk to your friend and come to know that he bought the same coat for $175. Subsequently, you realize, even though you love the coat, it is overpriced! The same holds good while investing in a firm’s stock. Buying even the bestcompany’s stock at the wrong time, lead to you losing your money.
Before the actual buying, it is vital to figure out the intrinsic value of an investment. Intrinsic value is nothing but the true value of an asset that can be obtained by subtracting away the company’s liabilities from the total value of the company’s asset.The advanced analysis also can be performed by multiplying the company’s earnings per share and the annual growth rate. Once you are good enough with the level of calculations, you can even project future cash flows. New investors can seek the assistance of brokers or financial experts regarding the calculations.
Market cap is a great tool to judge the size of the company. Calculating the company’s net worth that includes market cap, debt, share value, minority intereststhrough the quarterly and annual reports helps inevaluating the stock value for the potential investor.