There is a quote from a famous personality Norman R. Augustine “If all the stock market experts were so expert, they would be buying stock, not selling advice”. Though the statement is quite tricky, it carries a great message for investors. Following market analysts’ advice blindly should not be the only task for investors. In this article, you will get guidance on the facts to consider before taking stock buying tips.
Before investing in the share market, one must have certain basic knowledge about his doings. Taking advisors’ guidance is always good but along with this apply your own analysis. The combination of analysis not only leads you to profit maximization but also minimizes the risk factor.
Without taking any more time, let’s just step into the main topic. According to my views. there are a few facts and factors to consider before taking stock buying tips.
Facts to Consider Before Taking a Stock Buying Tips
As I have stated above that the following market analysts’ view is not the end of the story. You need to make your own analytical points before taking stock buying tips. Here are a few points you need to consider:
To analyze a market, generally, there are two ways, Fundamental and Technical. The fundamental analysis helps in analyzing a selected company’s background, financial statements, balance sheet, cash flow, profit & loss, various ratios, etc. Technical analysis has nothing to do with the company’s financial track record. It deals with price action and market position by applying charts, tools, indicators, etc.
First, we will cover the fundamental factors, you must see before analyzing a stock.
Fundamental Factors Before Buying a Stock
In order to clarify the topic, I divide the fundamental factors into qualitative and quantitative factors.
Qualitative Factors:
- Is the sector of the selected company profitable enough in the current market trend?
- Who are the company’s competitors? Sometimes, if a company has strong competitors, the risk factors become high.
- The Management of the Company plays a vital role. The company’s profit-loss directly or indirectly depends on the management group.
- What is the ethical background of a company? Ethical management indirectly affects the growth of the company.
- How innovative is a company? An innovative organization can work exceptionally in the market.
- Check the investment ratio of QIB (Qualitative institutional buyers), FII (Foreign Institutional Investors)
Quantitative Factors:
- Market Capitalization
- Past 5 to 10 years of financial Profit-Loss record
- Dividends
- Debt
- Earnings Per Share
- Price to Earnings Ratio
- Net Asset Value Per Share
- Return on Equity
- Debt to Equity Ratio
- Return on Asset
- Balance Sheet
- Cash Flow
Technical Factors Before Buying a Stock
Technical analysis carries more significance in comparison to fundamentals. Most retail investors, HNI, and analysts work with technical analysis tools to identify current and future trends. You have to give more importance to this. The Field of technical analysis consists of various tools, indicators, and charts. The factors of analysis are given below:
- Entry and Exit time- To invest in a share market entry and exit timings are the golden factors. Investors who are masters to identify the correct entry-exit point can rule the market.
- Support and Resistance Level- Besides entry and exit time, identifying the support-resistance level is also important.
- Buy and Sell signal – Charting software can generate a recommendation for you
- Identify the current market trend
- Analyze the upcoming market trend
- Monitoring the price action
- Don’t ignore the importance of volume. Try to form a correlation between price and volume.
- Must check the Target and Stop-loss of a stock
Conclusion
Therefore, these are the key points on which investors need to work out in order to find profitable stocks. Before taking stock buying tips, must consider these points. In conclusion, only when you are sure about a company then only invest in its stocks.
