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  • Key Points For A Sound Disciplined Investment 1 comment
    Jul 26, 2012 7:22 PM

    There are many factors that one must take into consideration when investing in a stock. People are very eager to place their investment because they always think the market or a great price will slip away from them but in reality there's always a stock one can invest in to make it translate into a great profit. Think about it.... there are always new companies that you can buy at a low price, companies making declines so you can get in quick, and companies developing unique new products that can generate a solid cash flow in ones portfolio which is what every investor wants. This is all nice but how does one know his company will generate all this money. There can also be a big downside were you can loose lots of money ,so there's two sides to this coin just like any other investment. In this article i will give you a few decent formulas and strategies to make sure your buying the company that will make you the big bucks.

    1.Dividend- For your long term investment which is what were talking about in this article it makes it crucial to have a dividend. If your stock has a strong dividend sleeping at night will be slightly easier....Let me explain. If you make an investment in a stock without dividend an the company takes a nosedive for the most part an atleast the time being you'll have a big noticeable dent in your portfolio. Your capital which you have lost when your stock took that nosedive wont be quite easy to make all back. Now if one has a stock with a dividend and i mean a consistent annually rising dividend one will be much safer in their investments. For one ,even if the same scenario i used earlier takes place where the stock nosedives and you loose most of your initial investment you can count on you strong quarterly dividend to get back to even for when the hard times hit your portfolio and you can get hit hard! One can also use ones dividend to work with the technique called " Dividend Reinvestment"which means that whenever you get your dividend it will buy shares for you based on how much dividend you get which is based on how many shares you have. Over time you'll acquire so many shares you can sell them off for a great profit. Dividend is also an indicator because when dividend is up that translates to a lower share price ,and when the dividend is down the share prices are up that's just a general rule. So obviously with that said one should take the option with the high dividend because that should mean that share prices are relatively low compared to normal share prices.

    2. p/e- This is a pretty fundamental ratio but it can help as well to making a good investment. To calculate the p/e simply take the current share price of the stock your looking at and divide it by the eps (earnings per share ) from the previous year. The p/e is important because it can tell you how cheap the price is relative to its earnings. 1-10 is low which means this is a relatively cheap investment that can generate large gains. 10-20 moderate, which is playing things slightly on the edge because it may still grow but then again if you buy it in the 1-10 range you have more room to grow and acquire more capital. an 20-30 high. this is slightly dangerous because this means the share price is high and the earnings are somewhat low. Might i add the 20-30 and above should not be factored out right away because it may be that the company might just be so high because of projections so people are piling into the stock but you can't know for sure. So to conclude the 1-10 ratio would probably be the most sound and generate the most cash.

    3. Company with good inventory- The company your investing in must have a good unique inventory because the more unique and strong the products the more money it can bring it Being unique is also important because since this product(whatever it is) is so different nobody will be able to catch up with the sophistication of your company ,it will keep it a safe investment for a long time with minimal competition. e.g... Apple. With that said,since the products are so strong and are making good sales its obviously because of the companies genius employees that are making there products far superior than to anyone else's. e.g.. Steve jobs. Clearly it is important to make sure you know the companies inventory and level of skill of employees making the products, so one can foresee were the company will be years later with regard to share prices and how competition will affect your beloved company you have so much capital invested in.

    4. Yearly charts- charts are very important to ones investment because it shows the investor basically how the stock has performed in past years. The way the charts look should always be taken into consideration in ones investment plan. One may think that if a stock keeps rising and things are going well you should just get in right away an surely it'll be fine because its going up quite consistently. This is not always the case, again if you buy it because its going up this might lead you to loosing money because you can forget about the value of the company and when it does decline for any reason in the world you'll loose more money than ever because you bought it high. Instead you must discipline yourself in your mind and say "i know this stock is doing well and i want to buy it but I'm going to wait for a good entry level" whatever that entry level is. So when it drops a certain amount of money I'll get in an history does prove that every single stock experiences great volatility through the stocks lifetime..And history is never wrong. So take it from me and history to discipline yourself even if a stock is doing great there will be a good entry price for you eventually and then you will be able to Max out profits. Another way of looking at it is when you look at the yearly charts and they are look bad. That will scare most people away but then again at that point the stock is cheap and you can buy for a possibly large profit because the upside is much greater than the downside because its already down, that is more speculative but you never know . If you want to have a better shot at making a more solid investment with more solid gains go with the stock that shows good steady gains and try to get in at a good price.

    5. PEG- price to earnings growth ratio. This ratio is also important in choosing a long term stock because this can help you see into the future in a sense. This formula is similar to the other formula of p/e except this helps show you how the flow can continue in the the future. the formula is by finding the p/e and then dividing that by the the annual eps(earnings per share) by finding peg which is a slightly more popular equation than p/e since it projects future earnings this makes it a good ratio to know when buying a stock especially for the long term

    In light of the above i hope it is clear that that when using these techniques it will help one in finding the proper stock to buy and makeing a safe sound investment and put more money in your pocket

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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  • chocolate1995
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    Author’s reply » Hey guys i would really appretiate feedback and answer any question you have thanks alot!
    26 Jul 2012, 10:48 PM Reply Like
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