How to research stocks to invest in

Learn how to analyze stocks

Determining how stocks will perform can seem like predicting the future, but through thoughtful analysis, you can paint a picture of what to expect. There are three ways to analyze a company’s stock:

• Fundamental: earnings, returns, and financial performance
• Technical: recent prices and trading patterns
• Quantitative: mathematics and statistical modeling

Each method of analysis will require different techniques on a stock’s performance. Fundamental analysis is the most encompassing because it considers the real-world performance of a company and factors in news coverage that might affect a stock’s performance.

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Set your risk tolerance, budget, and time investment

While investors aim to make money, this isn’t always guaranteed: all investments carry the risk of a loss and can be affected by larger economic issues such as inflation. Budget how much money you’re willing to put in, and what percentage of that you can tolerate losing. Your net worth can go a long way by determining your budget.

And consider your own investment in your investments: will you pay attention to the stock market every day, or are you interested in a “set it and forget it” long-term strategy? This can also determine your level of risk.

Find what you’re interested in

How do the companies you’re interested in make money? What industries do they operate in?
Businesses with high growth potential, such as those in the technology sectors, or businesses that will always provide a needed service, such as retailers and aviation companies, are factors to consider.

A company’s competitive advantages will be an edge in how companies compare to each other. Recent news coverage, whether positive or negative, will impact how its stock performs and how confident investors are in its stock.

Use tools available to you

Companies are required by law to publish certain information about their earnings, and all of this can be easily found online. Search for year-end reports on the company’s revenue, which will show profits, expenditures, and net losses. Press releases are a good source of these reports, as well as any successes the company might have had in a certain year.

Lastly, industry trends are the focus of financial news reports, and by reading diverse sources from CNBC, The Wall Street Journal, and Bloomberg, for example, you can piece together an overarching view of where the industry your selected company is heading.

Examine historic performance trends

Past performance may not necessarily be a guarantee of how a company’s stock will perform in the future. Markets are always fluctuating. If the market is down, someday it will rise again, and vice versa—this is how stocks revert to a long-term mean, which is a key component of market trends.

Another reason you should look at how a company has historically performed is to determine how resilient it can weather an economic storm. Price charts for a company’s stock can go back decades: here, you can compare how your chosen company has fared against both its industry rivals as well as how it has performed in both recession and boom times.

Use a brokerage service

Online brokerage websites offer tools such as stock screeners that can help you search and narrow down stocks you’re interested in. These stock trading platforms are aimed at keeping things both simple and secure for investors of all levels, and oftentimes there are financial experts who can guide you on how to invest.

With careful planning and diligent research, going to Wall Street can be a compelling way to build wealth. To find out other ways on making your money go further, check out Microsoft 365 for budgeting techniques.