There are numerous publicly-traded firms in the U.S. Given this, it can be overwhelming for a first-time investor to figure out what stocks to purchase. Before investing your money into shares of a company that you know nothing about, asking yourself these questions will help you pick great stocks.
What Does the Organization Do?
This should be the first question you ask yourself before purchasing a company’s stock. It is, after all, important that you know how the company makes money. Just doing a modest amount of research will give you a good enough understanding of the company’s business model.
What Are the Company’s Earnings and Revenues?
While there are numerous things that affect the stock price of a company, it’s financial performance is one of the key driving factors. So, ensure that you check how much money the company is making and what its revenues are. Compare these numbers with what the company made last year (during the same quarter) to know if there has been positive growth.
How Has the Company Performed in The Past?
While the historical performance of a company does not indicate it’s future returns, it’s still a good idea to check if the firm has a long track record of positive returns.
Does the Company Pay a Dividend?
Some companies distribute a part of what they earn to shareholders on a quarterly basis. If you need a steady source of income, pick a company that offers a dividend. That said, many companies choose to reinvest their earnings, instead of paying out dividends. This causes the company to grow faster, and investing in a company like this is a good choice if you don’t need returns on your investment right now.
What Is the Company’s Price-To-Earnings Ratio?
When researching different stocks, you should take the price-to-earnings ratio into account. A high ratio could mean that the stock is overpriced.
What Is the Company’s Market Capitalization?
Market capitalization is an indicator of the size of the company. A well-built stock portfolio should have stocks from large-cap, mid-cap, and small-cap companies.
Does the Company Operate Internationally as Well?
It’s important to check whether the company you are investing in also operates internationally. Your portfolio should, ideally, have exposure to the international market as well.
