One of the great advantages, which can also be a disadvantage, of the stock exchanges, is that they have a large number of companies and assets to invest. Just look at the long list of assets and organizations listed on stock exchanges like New York or London to understand it.
It is important to know how to choose which companies to invest in in order to take full advantage of all the benefits that buying a share can give you. Here we will give you some keys to take into account when looking for actions to invest your money.
▶ Net earnings per share
This is one of the most important points to take into account, since this directly influences the benefits that we can obtain from the actions. The net profit per share can be defined as the economic benefit or value that we will receive for each purchased share.
Obtaining it is very simple, we just have to divide the net profit after tax by the number of shares. This indicator will give us a more realistic number and picture of the benefits that we can obtain by increasing or reducing the number of shares. It also gives us an overview of how good the company is to invest in.
▶ Dividend yield
Dividends they are a kind of benefit that we can receive by having shares. Although not all companies offer them, there are some that do, which can mean an additional benefit, since it is money that we will charge.
Take into account the percentage or amount of dividend that you will receive in order to evaluate if the action is profitable in this sense. In addition to being additional income, dividend yield is useful in determining the market value of a stock.
▶ Financial statements of companies to invest
One of the factors that influence when determining the value of the shares of a company to invest is your financial situation. And the reality is very simple, few are those who want to invest in companies that operate in the red.
If what you want is to make a much more analytical, supported and informed decision then you must refer to the data. Many countries have laws where every company that operates on the stock market is obliged to show its financial statements to its investors, so you can know if it was profitable or, on the contrary, is having losses.
▶ Share price
Not all companies to invest have the same price or cost of action, This is because each company is different and has different valuations. We see a clear example with Amazon's share price, which is higher than that of other companies.
More than the value of the company, you must take into account the share price so it doesn't eat up your entire budget. Of course, you must be careful, since there are times when prices drop and they are a good opportunity to invest.
The PER is one of the most important economic indicators to take into account. East PER is the ratio of the listed price to earnings per share. This relationship tells us how many times we pay the benefits that a company offers us. Simply put, it's kind of value for money for the trading world.
If we calculate the PER in reverse, we can obtain another data of great importance, the annual profitability of the share. All this information can help us to see if our investment is the best or if the action has been owed to us.
▶ Target price
The target price is another point that you should keep in mind. The best way to define the target price is the price that the stock is expected to reach, this according to consensus and expert opinion.
To achieve this price target, analysts take a series of data, information and even news about the companies. The target price can give you an overview of the value, and performance, which you can obtain in the future for your shares, which will help you to know how much you could sell them for.
▶ Type of companies to invest
One of the factors that many of us overlook when choosing stocks to buy is the type of companies. And it is that, believe it or not, the category in which the company is located can affect the value of its shares.
For example, with the COVID19 pandemic, pharmaceutical companies may have a large area of opportunity for their actions. Similarly, technology companies will have greater growth in the following months. Instead, oil companies are forecast to gradually decline in value in the following years.
Believe it or not, the Broker may affect the choice of some stocks or companies to invest. Although this is not so perceptible, we see some indications in the number of companies that offer or in the legal regulations.
Taking the broker into account when choosing a company to invest in is a very important point, as it will affect the investment process. The best brokers usually offer much more accessible conditions, as well as a good number of companies so that you can choose which one to invest in easily and without complications.
▶ The situation in the world
Not only the situation of the company or the broker affects the price and performance of the stock, the world also influences. We must remember that the concept of globalization has caused an event in a distant country to generate a butterfly effect.
For example, the trade war between the United States and China affected the stock market appreciation of many companies. That is why you must take into account the current situation in the world, as well as the markets and their instability to make better decisions when choosing where to invest your money.
2 comments on «Companies to invest: How to choose the best ones?»
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