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Things to know and do before investing in stocks

When we think of saving money and passive income, the first thought that comes to mind is investments in stocks. In the current century, we have numerous options and channels of investment. And increasingly more and more people are learning about investments and personal wealth management. Among all the various options, investing in the share market and equity is still where the majority lies. Be it an individual investor or an institution, when it comes to putting the money in, one should be careful and thorough.

Here are some things that you must know and should do before committing your money anywhere.

  1. Understanding your risk appetite
    Before making any investment decision or planning your portfolio, you need to evaluate your risk capabilities. Since stock investments are subject to market risks, you can either make a profit or a loss. To understand how much can you risk and if you have disposable income. Whenever deciding to invest in any scheme or stock, you must weigh it against your risk capacity.
  2. Know your investment goals
    Just like everybody has a unique trading strategy, so are their investment goals. And before you chart out your portfolio and strategies, work on your goals. Are you investing in the long term or looking for quick wins? Are you new to the stock markets or have some understanding of the market trends. Markets may seem like money machines, but in reality, they are not. You need to figure out your investment term, the industry focus, and the types of securities you want to trade-in.
  3. Work out your fundamentals
    Once you have made the key decisions and decided on your budget and goals, next comes picking the right stock. Some stocks may be on the rise, while others can fall anytime. And there could be some worth taking the risk. Whatever security you choose, do extensive research and get the numbers right. Important stats like P/E ratio, debt to equity ratio, variance, market capitalization, and yields are a good place to start. If you are using a stock market app for your investments, you can find these details for each listed stock.
    But also, look at the historical trends and how the market is moving at the time of investment. People’s sentiments, company performance, and whether the market is bearish or bullish can have a huge impact on your returns.
  4. Revenue, volatility, and dividend history
    Some stocks can be highly volatile (dramatically changing) with high profits or heavy losses. While others are safer and less risky investments. Similarly, when picking a stock, look at the revenue growth and performance of the company. If you can, do check out the stockholding and trading patterns for the security that interests you. Lastly, although not all stocks have dividends, those which do can be worthy to look at. So, track down the dividend announcements of your shares.

The bottom line about stock market investments is being careful about the risk. And to act practically and sensibly in critical situations. Do a thorough research and screen stocks against the toughest metrics to pick your first stock.

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