A stock represents a share in any company. Companies issue stock as a way to raise capital without guaranteeing payments to creditors and interest rates. Stock certificates represent your claim on a company’s assets and earnings and assure you of voting rights. While owning stock doesn’t mean you handle the day to day management of a company, it does give you a voice in the elected board of directors, which should, in theory, protect your interests. Stocks are bought and sold on an exchange. The two most important exchanges in the United States are the New York Stock Exchange and the NASDQ.

For many investors, utilizing the experience and expertise of a stock broker is the most effective and efficient ways to buy and sell stock. Stockbrokers monitor the markets, identify trends, and execute trades on behalf of their customers. Brokerage firms often charge fees for their expertise, research, and management on behalf of you and your stock portfolio. When you utilize a brokerage firm, you spend some time with an advisor discussing your long and short term financial goals and creating a portfolio designed to meet those goals.

Many investors chose to do it on their own. The number of internet only brokerage firms gives investors the platform and technology to manage and execute their trades. Sites like Google Finance and Yahoo Finance as well as specialty finance sites provide extensive research on companies, their earnings, and their liabilities. On-line brokerage sites give investors the platform, but not the expertise to execute trade. Successful on-line investors have put a significant amount of time into researching the right mix of stocks.

Before buying stocks, you will want to pay close attention to a number of areas:

– Earnings: You want to see progressive, if not significant growth from year to year.

– Sales: These should also steadily increase every year

– Debt: You would like to see the debt decrease every year. At the very least, the company’s debt should be lower than its assets.

– Equity: Subsequently, you should growth in the company’s equity every year.

There are other measures to consider before investing in a stock.

– Price to Earnings Ratio: For large cap stocks, the P/E ratio should be under 20. For all other stocks, it should register below 40.

– Price to Sales Ration: The Price to Sales Ratio should be close to 1.

– Return on Equity: The ROE should grow by 10% every year.

– Earnings Growth: You will want to look for sustained earnings growth over several years. A company with an earnings growth of 10% or higher is a very strong and healthy company.

– Debt to Asset Ratio: Debt should be half of all assets.

Exploring these areas will provide a potential investor with a good snap shot of the company’s economic viability and potential for growth. Once you have researched a company, you can decide if investing fits into your long and short term investment plans. Of course, creating a diverse portfolio, a good mix of stocks, mutual funds, and cash is the best plan for long term investment health.

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Are you looking for more information regarding buying stocks? Visit http://www.smart-investing-in-stocks.com/invite.html today for more information!

Author Bio: Are you looking for more information regarding buying stocks? Visit http://www.smart-investing-in-stocks.com/invite.html today for more information!

Category: Finances
Keywords: buying stocks