The turbulent economic situation and the upheavals in the stock market as is being witnessed today calls for extreme caution while trading in stocks.
You need to take control and plan your moves based on thorough research and reliable inputs of stock ratings, live stock market reports and information regarding highest gaining stocks.
Trading in stocks and risking your hard-earned money without proper research and merely going by stock tips and information from other unreliable sources can result in financial loss.
Stock research and analysis is extremely important because a little care in the beginning in locating the right stocks to trade can result in much higher returns than in any other form of investment.
It will be possible for you as a prospective buyer to get a more informed view of which way the stock that you are thinking of investing in will move if you have done proper stock research and have spent enough time to study the financial history of the company.
While it is not always possible to predict the future movements of a stock, evaluation of its movements over the past few years of the company's growth can certainly give a feel of the most likely possibilities.
The general areas where you need to concentrate your research and probes before you decide to invest your money into a stock include finding out whether the company does not have too many liabilities and debt,if it is able to generate sufficient income, if it has sufficient satisfied customers,its cash flows are progressing satisfactorily, it is able to invest in its future and is trading at a satisfactory market value.
The main objective in researching a company, evaluating its stock ratings and studying the stock's financial reports is to establish the stability of the company, its prospective growth and its future.
Although you might decide to invest in a weak company and hope that you would be able to reap a rich harvest if the company turns around and its stock value shoots up, it would be a risky investment which might most probably go wrong.
Instead, stock ratings will prompt you to invest in stocks of companies that are already doing well and are on a solid footing that will ensure continued growth.
An essential part of your research into stock ratings and the company that you wish to invest in also includes finding out whether the company's cash flow is healthy or negative in which case it is better to keep away from its stocks.
Moreover, it is better to refrain from investing in a stock if the company has large and increasing debt, decreasing revenue or high management turn-over.
These signs indicate that there is something intrinsically wrong with the company and this is the reason why you should desist from investing in weak companies.
The other important steps that should be taken to invest wisely in stocks are checking the company's stockholder reports, industry publications, news releases and other publicly available information besides checking the stock ratings.