While the performance of Netflix, Amazon, and Apple’s stocks have remained at the forefront for the last 30 years, the entry point for these investments is quite steep. A single share can set you back a few hundred dollars. Therefore, you may want to consider other high-yield companies.
When you’re considering which stock to buy, just like investing in penny cryptocurrencies, there are five important things that you need to focus on. These won’t only help you decide what to buy right now, but they’ll also help improve your future stock investing strategies. Let’s dive into it!
1. Understand the Company
Try to discover as much as possible about the company behind the stock you’re planning to buy. Look at what they do, how they make their money, who runs the company, and more.
Check their competitive advantage. This is what sets the business apart from its competitors, like Google’s search engine algorithms or Disney’s characters and theme parks. The greater their competitive advantage, the safer your investment might be.
Peeping into old financial documents can help predict how that stock might perform in the future. Look at revenues, profits, and debt loads. A company with robust profits demonstrates efficient operations, so stock prices are more likely to rise.
3. Consider the Stock’s Price
In the world of stock investing, you can’t just focus on buying popular stocks. Sometimes, hugely popular stocks are overpriced, which can lead to poor future returns. So, while the stock price is certainly something you should consider, remember that it’s only a piece of the puzzle.
Instead, try to find undervalued stocks, which are stocks that cost less than what their fundamentals suggest they should be worth. Buying undervalued stocks and then waiting for the market to recognize the company’s worth can be a smart way to make money.
4. Taxes on Investments
If you keep a stock for more than a year, you might save on long-term capital gains. These are taxed at a lower rate than if you sell within a year of buying.
There’s also a technique called tax-loss harvesting. In basic terms, it’s about selling a stock that has lost value to offset gains from other stock sales.
Some companies will share a portion of their profits with investors through dividend payments. Even if a company’s stock price doesn’t rise, a strong dividend can give a steady return on your investment.
A good dividend to receive from a stock typically ranges from 2% to 6%. Some top dividend stocks have a dividend yield of 12%.
Identifying the Right Stock to Buy: Expert Guidance for Your Investments
Finding a stock to buy can be an exciting process, especially when you know what to look for. Always learn as much as you can about the company, especially its financial standing. Understanding how taxes can affect your returns may help you decide if a stock is really worth the investment.
Dive into the rest of our business section to learn what makes a good company. The best way to find a stock is by doing your research.