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 * Personal Finance
 * Start Investing

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How to Start Investing


WHAT MAKES A GREAT STOCK?

THERE’S AN OLD SAYING: ALL STOCKS ARE BAD UNLESS THEY GO UP. WE HIT THE BOOKS
AND FOUND 5 THINGS THAT THE BIGGEST STOCK MARKET WINNERS HAVE IN COMMON.


IS THE COMPANY PROFITABLE?



Rule number one: Look for companies that are making money. These are often
companies with IPOs.

Money left from sales after paying for things like staff pay, office space and
supplies is counted as profit. If expenses exceed revenue, then the company is
losing money and isn’t profitable.

Profits are important because they can be used to pay shareholders dividends
(sharing the wealth with the stock owners) or reinvested in the company with the
aim of expanding—say, opening new stores or launching a new product.

On the other hand, a money-losing company often makes a poor investment. A
company can’t lose money forever without going out of business—in which case,
the stock is worth zero.


DOES THE COMPANY HAVE SOLID SALES GROWTH?



When looking for stocks to buy, consider those with strong increases in sales
(aka revenue), comparing the latest quarter’s figures with the year-ago quarter.

Also look for robust annual sales increases. This indicates a growing business,
and stocks of growing businesses are more likely to rise more than slow growers.
Often the growth rate and related stock price rise is steep and very rapid.


DOES THE COMPANY HAVE GREAT PRODUCTS THAT PEOPLE WANT?

Companies whose stocks perform the best tend to offer quality products and
services at prices people are willing to pay.

In recent years, online streaming service Netflix has grown its earnings at an
average annual rate of 98%. Its stock price has risen over 1,336% in the past 10
years, reflecting that earnings growth and making it one of the very best
performing stocks in that period.

An investment of $10,000 on April 29, 2011, would have bought a little over 330
shares. Those shares would be worth about $152,337 ten years later in April
2021. Those are the kinds of life-changing gains investors aim for.




IS THE COMPANY A LEADER IN ITS FIELD?

If you’re buying a stock, you want it to be the best among its peers. Research
shows that leading companies in their industries move up in price faster than
their lagging competitors.

Think of electric cars and one name probably comes to mind first: Tesla. The
company was the first to market with a high-end electric car with a long range.
Now it’s unquestionably the leader in electric cars, with technology and cachet
far beyond other big car companies like Ford, Toyota or Volkswagen.

Tesla stock raced from a low of $3.51 per share (split-adjusted) in 2010 to
$1,000 in December 2021 – a gain of over 28,000%.

That’s what a leading stock looks like. These are also known as blue chip
stocks.




IS THE STOCK IN HIGH DEMAND?



Stocks follow the same law of supply and demand as the whole economy: if a lot
of people want something and the supply is limited, then the price goes up.

But in the case of the stock market, it’s not everyday investors that create the
high demand needed to move the price up—it’s the big institutional investors
like Wall Street banks, mutual funds, hedge funds and their peers.

So with stocks, you have to ask yourself: Are these big institutions buying the
stock? Heavy volume (the number of shares traded) on a day when the shares are
up in price indicates the big boys are buying – which will power the stock even
higher and provide a floor of support. That’s why you should always look at
volume on a chart.


KEY POINTS

1

Stocks that make the biggest gains have several things in common. Look for these
when choosing a stock to buy.

2

Profitable companies with big earnings and sales growth tend to rise in value
faster than unprofitable or slow-growing companies.

3

Supply and demand dictates the price of a stock. If a company’s products or
services are in high demand, and their stock is being bought heavily by
investors, then a stock will generally go up.

Read more on How to start Investing

 * Why Start Investing
 * Types of Investments
 * What is the Stock Market?
 * How to Trade Stocks
 * What Makes a Great Stock
 * How to Read a Stock Chart
 * Stock Market Myth vs Facts
 * How to Get Started

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MORE ON INTRO TO INVESTING

WHY START INVESTING NOW

If you’ve got money, you can make it work for you. Here’s the best part: you
don’t need a lot to start, and getting an early start can make a massive
difference.

TYPES OF INVESTMENTS

Where can you stash your money, aside from a shoebox under the mattress? These
are the most common ways to invest and grow your funds.

WHAT IS THE STOCK MARKET?

Bulls, bears and big banks: It’s all part of the rich stew that is the stock
market. Here’s an intro to how it works and the lingo to know.

HOW TO TRADE STOCKS

Buy, sell or hold? Trading stocks is how you make money in the market, and we’ll
show you how it’s done.

WHAT MAKES A GREAT STOCK?

There’s an old saying: All stocks are bad unless they go up. We hit the books
and found 5 things that the biggest stock market winners have in common.

HOW TO READ A STOCK CHART

Got 10 minutes? Then you can learn to read stock charts and give yourself a
massive edge when you’re investing.

STOCK MARKET: MYTHS VS. FACTS

The stock market has more myths than ancient Greece. We’ll use research and
facts to debunk the 6 most common ones.

HOW TO GET STARTED

Now that you’ve learned about the stock market and trading, interested in trying
it out? Here’s your guide to jumping in.

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