If you’re just starting out and have just opened a brokerage account, it’s tempting to execute trades as soon as possible. However, it’s crucial to carefully analyze every potential investment before putting your money at risk. To make smart decisions, consider your time horizon, investment goals, and investor profile.
The dividend track record of a company is a good way to gauge the company’s financial health. This indicator tells you if the company has enough free cash reserves to pay dividends and if they have a strong commitment to paying their shareholders. On the other hand, a company that doesn’t pay its dividends on time could be suffering from some financial problems. Also, consider the debt-to-equity ratio, which is the ratio of the company’s total liabilities to its shareholders’ equity. A higher ratio indicates greater financial leverage.
While short-term stock prices are volatile, longer-term stock prices can provide solid returns. The S&P 500 has produced positive returns 100 percent of the time over the past 20 years, according to research firm Crestmont Research. This means that the stock market is an excellent choice for long-term investments. Just be sure to wait out the short-term volatility so that you can reap the rewards of long-term investing.
There are several factors that influence the stock price. A strong quarterly earnings report, a major announcement of interest rate hike, or a major change in foreign trade policy can send a stock’s price up or down. These factors can cause investors to lose money or make big gains.