Educating Investors

Why is it important to research a stock before buying it3 min read

The title looks too obvious to us, and we too believe that this should be done every time before we invest not only in stocks but everywhere your money is involved, research is important.

Financial research of stocks before investing can help you avoid huge losses.

But is Financial research everyman’s cup of tea? This is a fact, most of us are not financially literate and do not understand some of the financial ratios or the balance sheets. So what should a common investor do?

Below are some of the important attributes that every investor should consider, before investing their hard money in any particular stock:

  1. Price Volatility: One should look at how volatile is the stock, some stocks show the topsy-turvy pattern in their charts and it can be too risky to invest in them, one should always avoid investing in these stocks due to their high price volatility.
  2. Types of Asset class: One should look at the type of the asset class it can be a speculative stock or a Blue-chip stock, Speculative stocks are basically those stocks which have to potential to generate great returns in a short period, while Blue chips stocks are those which have a large market cap and grow at a constant pace, they are comparatively less volatile than speculative. If you are looking for low risk and constant growth then one should prefer the Blue-chip stocks. Refer to this article to know more about Blue-chip stocks.
  3. P/E ratio: The Price Earnings Ratio (P/E Ratio) is the relationship between a company’s stock price and earnings per share (EPS). It is a popular ratio that gives investors a better sense of the value of the company. 
  4. Dividends: A dividend is the distribution of some of a company’s earnings to a class of its shareholders, as determined by the company’s board of directors. Shareholders are eligible for dividends as long as they own the stock before the ex-dividend, Refer to this article to know more about Dividends.

Apart from these, one should also be updated about the sector of the stocks, whether the sector is performing or not, all the news related to the stocks in the past 1-3 years.

The above attributes of financial research cannot guarantee that the stock will perform well in the coming time, but this will give a fair understanding of the business which you are about to invest.

For all those who cannot research these attributes by themselves and want to invest in best stocks for the long term can prefer StockBasket – a long term buy and hold investment platform that can help you create wealth in the long term.

StockBasket is an expert-curated ready-made basket of stocks, which are categorised as per an individual’s financial goals, long term themes, risk appetite and time horizon. 

These baskets are also continuously monitored by the StockBasket team of experts, and stocks are rebalanced timely.

So for all those who interested to invest in stocks but find the research too difficult, they can invest n these  baskets and can start to build huge wealth in the long term

StockBasket helps retail investors to invest in great quality mini-portfolio of stocks, thus helping them to create wealth in the long term.

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