What are Key factors to consider when investing in stock market?

Question

What are Key factors to consider when investing in stock market. I am looking to invest in smaller companies with smaller stock prices. I am also looking to invest short term and long term. What are key factors to consider when investing short term and long term. Such as, P/E ratio, dividend yield %, profit etc...

Answer 1

Investing is about investing in businesses, yes the various ratios tells you something about the business but as an average of say temperature over a week is less indicative of overall average then one of the entire year, these "key factors" are less accurate and less indicative of the business as the businesses gets smaller. Smaller businesses are difficult enough to research and the data is of course less reliable as the business are smaller. Many brokers will deal with fractional shares, a small price on the share is not an advantage. Knowing the business is an advantage so you're looking in the wrong places for an investment.



Being a penny stock isn't a detractor from making a business a good investment but penny stocks are not where you go to find good investments, there are fewer there and it's harder to determine who they are. Small stocks at small prices are not for beginners and experts find easier pickings else wheres.

Answer 2

No stock is "safe". Any equity investment is risky. If a company performs poorly, you will loose money. If the company fails, you will loose your investment. You can reduce your risk by researching companies. A strong, well positioned profitable company with a low debt load would be the safest. Some industries have stronger risks than others. For example, technology stocks have the inherent risk of the company becoming obsolete or putting out a bad product - like Apple would plummet if the iPhone becomes uncool. Oil companies have the inherent risk of fluctuating oil prices and natural disasters. Reading through a company's risk factors in their annual report or prospectus will give you a better idea of the risks that you are facing. Of the suggestions given, I would have to agree with utility company investments as long as the company is not loaded with debt and is profitable. The reason is that these companies will usually have a geographic monopoly, fairly stable revenue stream and in some areas, they can even collect taxes to pay for capital expenditures which reduces future need to incur debt.

Answer 3

ENRON