Basics of Successful Equity Investing
Now that the economic data coming out in the press is starting to look brighter with each and every day, a lot of people may feel that now is the right time to start investing in equities. Trading successfully is never easy, but following these basics can certainly help.
1. Familiarize yourself with the security's Price-to-Earnings ratio. Also known as the PE ratio, this figure tells investors how much they are paying for each dollar earned by the company. In other words, the lower the PE ratio, the better the price for the security. Investors can gauge whether one security is deemed more expensive than comparable securities, such as competitors within an industry.
2. Understand the security's Debt-to-Equity ratio. This simple ratio tells investors how much debt a company owes for every dollar they have in equity in the company. Obviously, the higher this number, the more debt the company has, which can translate into solvency problems during difficult economic periods. The lower the debt the better, but understand that debt-to-equity ratios will vary from industry to industry, so one security's ratio needs to be compared to another security's in the same industry.
3. Know what Analysts say about the security. Most publicly traded securities will be reviewed and rated by companies that trade in that security. Recommendations in the form of a Buy, Hold, or Sell recommendation are often made. Understanding what professional analysts think about the security can help confirm or refute an investor's independent research on a security.
These three tips are starting points for many investors. Although the list is nowhere near being all-inclusive, investors who take the time to find this easily available information will find they are making smarter trades over the long-term.
As an alternative, investors who prefer a hands-off approach to their investment accounts should consider mutual funds. This puts the onus of proper research on the shoulders of the mutual fund company and not the investor. - 23223
1. Familiarize yourself with the security's Price-to-Earnings ratio. Also known as the PE ratio, this figure tells investors how much they are paying for each dollar earned by the company. In other words, the lower the PE ratio, the better the price for the security. Investors can gauge whether one security is deemed more expensive than comparable securities, such as competitors within an industry.
2. Understand the security's Debt-to-Equity ratio. This simple ratio tells investors how much debt a company owes for every dollar they have in equity in the company. Obviously, the higher this number, the more debt the company has, which can translate into solvency problems during difficult economic periods. The lower the debt the better, but understand that debt-to-equity ratios will vary from industry to industry, so one security's ratio needs to be compared to another security's in the same industry.
3. Know what Analysts say about the security. Most publicly traded securities will be reviewed and rated by companies that trade in that security. Recommendations in the form of a Buy, Hold, or Sell recommendation are often made. Understanding what professional analysts think about the security can help confirm or refute an investor's independent research on a security.
These three tips are starting points for many investors. Although the list is nowhere near being all-inclusive, investors who take the time to find this easily available information will find they are making smarter trades over the long-term.
As an alternative, investors who prefer a hands-off approach to their investment accounts should consider mutual funds. This puts the onus of proper research on the shoulders of the mutual fund company and not the investor. - 23223
About the Author:
Learn more about Where To Invest and the best Bond Funds at Christopher Fitch's website, the Mutual Fund Site.org.
posted by X - Men @ 7:57 AM
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