We have many friends that would love to try their hands in stocks investment but usually they will mentioned that they have no experience & knowledge in stocks investment. The thing is, if you have no experience or knowledge, what should you do? There are many ways for you to acquire knowledge in investment such as reading, online course, live course & many others. If you are keen to learn how to grow money via stocks investment, there are many ways for you to learn & it can be just 1 click away.
Below is some of the Useful Guide to Select the Best Stocks that you can refer to :
1.Invest in a Business that You Can Understand
If your current job is related to Energy sector, you should start to explore Energy companies as a start since you are able to understand this business better. Peter Lynch who is one the most successful investor of all time shared this powerful lesson in his book One Up on Wall Street. Its part of my recommended books that you can check out.
2.Do a Detailed Research on the Company
If you are interested in investing in stocks, one of the most important thing to do is to study the company by reading their Annual Report. The company must have a strong balance sheet to ensure they are able to withstand any economic downturn. Some of you always do a detailed study whenever you want to purchase a new handphone or go for holiday. It is the same concept. You should do a detailed research on the company before you purchase their stocks. Remember Grasshoppa, you are investing in a business.
3.Company that are Growing
Look for potential growth. An expansion or new project will help your stock value to grow. At the beginning of a Financial Year, each company will always set a new goal to grow their company. If you happen to stumble into a company that have huge potential growth, put some time to study the company.
4.Are they Profitable?
It is important especially for the companies that pays dividend. Profitable company will pay higher dividend. For companies that doesnt pay dividend, their profit shall be reinvest to grow the company further.
5.Companies with Low Debt to Asset Ratio
You can calculate that by dividing the company Total Debt by Total Asset. What is the best Debt to Asset Ratio? Personally I think 0.4 is acceptable. Too much debt will affect the company cash flow & profits.
6.Who is their Competitor?
Its important to know who is their market competitor & where the company stand out against their competitor. Are they the market leader in their respective industry? This will help you to make a better decision to select your potential stocks once you know about the company competitors.
7.Always Look for Cheap Stocks
How???? Always look at their Net Tangible Assets (NTA). When you study on your potential stocks, this is something you have to look at to ensure you dont buy overpriced stocks. The formula as below :
Net Tangible Assets Formula =
Total Assets (Deduct Intangible Asset) – Total Liabilities / Total Outstanding Shares
8.Think like a Business Owner
Whenever you invest in a company, you are the shareholder of the company. Always look at the company from a Business Owner point of view.
9.Look for a Company with Good Management Team
No matter how good the company is, if the Management Team is bad, this will lead to bad decision & it will affect the company profit & growth. Always do a detailed study on the company Management Team. According to Warren Buffett, he will seek to invest in a company where their Management Team manages the business as if it were their own & not those management that are looking to make quick money from their shareholders.
10.Good Return of Investment
ROI is use to measure the efficiency of your investment. This can be in form of dividend or the increase value of your stock price. You can refer the company ROI by referring their past history or price chart.
11.Company that Pays Dividend
My minimum criteria to purchase the company stocks is dividend. I find it to be important since this will be part of my income. Imagine you are the shareholder of the company but you are not getting paid. I truly believe that each shareholder are entitled for the company profit in form of dividend.
Investing in stocks or other investment is a good option for you to make extra money aside from your 9-5 job. Long term investment will help you to grow your wealth. Look at Warren Buffett, he made his first Million at age 30 by investing in stocks & at age 56, he became a Billionaire via stocks investment. Remember Grasshoppa, let money work for you not you work for money. If you have no idea where to start, you can always refer my recommended books to start your investment journey today.