The stock market brings so many investment opportunities and you are probably already aware of that. If you aim to invest your money in stocks, apart from choosing the right broker there are other important things. Here are some tips that will help you streamline your investment.
How to find stocks to buy on the stock exchange
Start by buying stocks of companies you already know. Then turn to google finance to find companies that you don’t know but work in the same industry as the companies you know. Already this allows you to have an overview of companies in sectors of activity that you know.
Of course, just because you like a company and its products doesn’t mean it will be a good buy on the stock market, but at least you know what they are doing and why the products are good. The key is knowing what makes a business important to its customers and how much longer that will hold in the future. You should ask questions such as If oil prices keep rising over the next few years, which companies are likely to benefit?
What types of shares can you invest in?
If you are wondering in which sector to invest in the stock market, you might be overwhelmed. he truth is there are many sectors to invest in the stock market. There are different types of stocks on market. Apart from private and, public companies share, we can make a distinction based on their primary business activity:
- Energy
- Health
- Raw materials
- Financial actions
- Industrial values
- Information technology
- Consumer discretionary
- Consumer staples
- Immovable
- Telecommunications
- Public services
There are also promising new alternative industries such as shares of related companies:
- Crypto-currencies
- Blockchain
- The cannabis industry
- Start-ups
How do you find the right time to invest?
How to invest at the right time? Finding the right time to trade or invest in the stock market is not always easy. If you want to analyze the stock markets, there are two main methods: technical analysis and fundamental analysis.
Technical analysis or the analysis of charts of the price of an asset
Short term traders especially appreciate technical analysis to determine when to enter and exit the market. This type of financial market analysis is based on three assumptions:
- the prices displayed include all the information available
- assets always evolve in trend
- history tends to repeat itself
Technical analysis is, therefore, based on the analysis of price action. We often add to the latter technical indicators, support and resistance levels, trend lines and much more. The goal is to determine the future direction an asset will take and obtain buy and sell signals.
Among the most popular technical strategies for spotting good times to invest in the stock market, we will find the range, pullback, gap or even breakout trading. The most used technical indicators are moving averages, Bollinger Bands, RSI, and MACD.
Fundamental analysis or analysis of the intrinsic value of an asset
Fundamental analysis is geared more towards long-term investing to capture large moves. Indeed, this type of financial market analysis considers the evolution of economic, social, political and monetary forces that affect an asset’s price.
The basic principle of fundamental analysis is that an asset’s current price does not necessarily reflect its actual value. Fundamental analysts, therefore, seek to determine the intrinsic value of an asset. Then they compare it to the current price. The goal is to determine whether the asset in question is overvalued (potential sell signal) or undervalued (possible buy signal).
Among the fundamental factors to follow for a financial and accounting analysis of a company before investing in the stock market, we will find the announcements of results, the yield, the distribution rate, the prospects for growth, the performance of the company concerning its sector of activity, earnings per share (EPS), the price-to-earnings ratio (PER), etc.