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Learning how to know when to buy a stock isn’t an exact science. If it was, monkeys wouldn’t be able to routinely beat humans when it comes to picking out stocks.
There is always the element of chance, but you can turn chance in your favor with a few helpful tips. In this article, we examine six that will mitigate the risks.
Learn the Terminology
The first thing to learn about when to buy a stock is the terminology. There are certain words and phrases that affect how the stock is purchased.
- Market order: buying at the best available price
- Limit order: buying at a specific price or price range
- Stop-loss order: market order is exercised at the best price available
- Stop-limit order: limit order happens when the stock hits a specific price or better
Once you’ve got the lingo, you’re able to start looking at the specific stocks and industries. Now it’s time to look at what kind of risks you’re facing.
Study Volatility
You can buy a stock with a good idea of how it will perform in the short and long terms. You do this by studying the return charts.
Examine performances at one month, six months, one year, five years, and 10 years. This will give you a general idea of where the stock is headed and how steep of a rise or decline it’s likely to experience getting there.
Keep Your Eye On Earnings Reports
Buying stocks without following those earnings reports is a recipe for disaster. Instead, you want to have the dates marked.
Place them on your calendar with reminders to sit in. Earnings reports give you a transparent look at whether the company hit, missed, or beat revenues. Falling short is an indication to sell unless you plan on holding for a long period of time.
Follow Company News
Whether working with a stockbroker or flying solo through a platform like monexsecurities.com.au, you need to get to the point where you can become a student of the companies you’re following. See what they’re involved in.
What place do they have in their industries? Which products or services are they offering or looking to expand? This will give you a feel for how the company will look down the road and whether it’s worth buying and holding onto through the inevitable ups and downs.
Determine Sell vs Hold Times
One of the best stock buying tips is to determine your motivation for buying the stock before actually making the purchase. Are you looking to keep it as part of your retirement portfolio, or would you like to just turn a nice profit?
The answers are important. They will help you determine what to buy, how much of it to buy, and what you need to risk to meet your goals.
Limit Fees
Fees eat into your profits. The more you can eliminate them, the better position you’ll be in to turn a profit in the short and long terms.
Shop around. Check what you’re getting for your money, as well as the tools that will be available to you when it comes to research.
Learning How to Know When to Buy a Stock Is About Timing and Research
Understanding how to know when to buy a stock can keep you from sinking too much of your money into stocks with a negative trajectory. It can also help get you to retirement sooner. For more financial and investing articles, check out some of our additional posts!
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