Essentials You Need to Know About Every Stock You Buy

Cubes with the words SELL BUY on financial chart

The stock market like Berkshire Hathaway is an amazing way to make money and grow wealth. However, if you want to be successful in this market, then you need to know how it works. There are many things to know about investing in stocks, but we will discuss here the most important ones that must be known before buying a stock.

Know the Stock Price: Basic information you need to know before buying a stock

The first thing you need to know about the stock is its price. If you’re buying a stock, you should always look at the price history of that particular stock to see how it has performed over time. You can find this information on any financial website or apps like Bloomberg and TradingView.

Once you’ve done that, you want to take note of two things:

The current price and range of the stock (for example, if it’s $10-$20, then we’re talking about a very large fluctuation in price).

The average price over time for this particular company (so if it has been selling for an average of $16 per share, then this means there is some stability in terms of value).

Know the Number of Shares Outstanding:

We can’t miss the number of shares outstanding of a company, which can help investors find investment opportunities. Why? It’s very simple: if the outstanding shares are large, you have to spend more money for each share and vice versa.

The number of shares outstanding is simply an important metric that measures how many shares are currently outstanding in circulation. We need to know this because it gives us an idea about how much money a company has raised from their shareholders, meaning that once their sales increase, their cash flow increases too.

Know the Market Capitalisation of Companies

Market capitalisation is the total value of all shares issued by a company. A company’s market capitalisation can be calculated by multiplying the number of outstanding shares by the price of each share.

Knowing this information will help you determine whether or not you should invest in that particular stock, fund, or mutual fund.

Know if there are Dividends Payout or Not:

Dividends are usually paid out to shareholders by companies. They are usually either a percentage of the share price or a fixed amount per share.

Many companies pay dividends quarterly or annually, but some companies do not distribute any dividends at all. This decision is up to management’s discretion. It often depends on how well the company has performed over a given period, its financial situation, and other factors such as cash flow and debt outstanding, among others.

Know the Company’s Main Product Type or Service Type:

We must make sure we’re able to buy stocks from companies focused on one purpose and not companies that are too many things spread out in many markets.

Know the Company’s Main Product Type or Service Type: We must make sure we’re able to buy stocks from companies focused on one purpose and not companies that are too many things spread out in many markets.

Understand Their Business Model: If you don’t understand how a company makes its money, it will be very difficult for you to invest in it. The more complex the model is, the less likely it is that you’ll get your money back at some point. It’s much better to invest in companies with simple models than those with complex ones.
Determine Their Target Market: Before buying a stock, we must know who will benefit from this particular product or service.
Find Out Their Value Proposition: A value proposition is basically what makes this company different from its competitors. (it should include): the competitive advantage the target market why people would want to buy their products/services(This can be expressed as an equation like:)(value proposition = competitive advantage + target market + reason why people would want to buy their products/services).”

If you want to invest in stocks, you can not ignore these five basic criteria

If you want to invest in stocks, you can not ignore these five basic criteria:

Stock price. It is important to know the current stock price of a company. The stock price is a good indicator of how well a company is doing at any given time.
Several shares are outstanding (or float). It also helps you understand how much money could be dilutive if an investor asks for his or her cash back from buying a company’s stocks. To put this another way, it’s essential to know how many people own portions of the companies’ total assets such as building or machinery and equipment so that each shareholder has some stake in those assets when making decisions about whether or not they want their money back at any time.
Market capitalisation (or market cap). Market cap refers specifically to how much value investors place on all outstanding shares together relative to other public companies with similar characteristics (such as size). This number will give you insight into what kind of investment opportunities are available based on size alone.

Conclusion

If you want to invest in stocks, you can not ignore these five basic criteria. It may not be easy at first, but if you take the time to learn about each company and understand why they are good investments, then it will make your investment decision much easier.

Disclaimer: This article is not intended to be a recommendation. The author is not responsible for any resulting actions of the company during your trading/investing experience.

Image source: Depositphotos.com