Getting hold of company stock is a tried and tested way of expanding your investment portfolio away from conventional savings accounts, etc. Whether you’re buying stock from an exchange like the Australian Securities Exchange or one further afield like the Nikkei or the Dow Jones, there are plenty of options. But as is the case with almost every other type of investment vehicle, there’s no guarantee that your investment will pay off. Its value can plummet as well as rise, which makes it vital to assess the data correctly. This blog post will explore what to look out for when you’re considering snapping up a share or two.
The fundamentals
Before deciding on a particular share investment, it’s worth familiarising yourself with the company’s ins and outs. It’s worth looking at the company’s overall market capitalisation and finding out how much revenue, profit, and loss it has made in recent years. That way, you can start to assess whether the firm is likely to be solvent – and ideally more profitable – when you come to sell the shares. Sometimes, financial analysis tools – such as those offered by MetaTrader – can help.
The wider context
But it’s also important to not get bogged down in figures. Once you have worked out the firm’s basic financial position, you can contextualise the information with some qualitative research. You can read about the firm in the financial press, for example, and decide whether or not it shows sufficient potential – or whether any recent events are likely to impact demand for its goods and services in the future. Share recommendations from experts are also available in the finance pages of newspapers or online and are invaluable when getting your research verified or disproven by an expert.
Stocks or derivatives?
Finally, it’s worth also thinking carefully about the form that your stock investment might take. Stock investments can be made using several different asset classes, and it’s essential to pick the one that’s right for you. You can, of course, buy shares outright. But it’s also possible to invest in a contract for difference, or CFD for short, which is a type of derivative financial product. Contracts for difference are traded “on the margins”, which means that leverage can raise the potential return and the potential risk. CFDs may be riskier, but they are also in many ways easier to trade – as they don’t require the kind of administrative burden as a “real”, ownership-conferring share.
When it comes to purchasing stock, there’s plenty to consider. Whether it’s looking at the fundamentals or deciding between traditional stocks and derivatives, there’s lots of flexibility to pick the right approach for you. By following the tips outlined in this article, you can boost the chances that your stock investments will go well.
