The Stock Investment Beginner's Guide - Map to Financial Freedom and resources you'll require

Welcome To The World of Stocks and Trading.

This may be your best and wisest step towards your financial freedom, even if it isn't your first step.
Congratulations for working hard towards increasing your familiarity with  

Ten Important Points about Stock Investing 

If you’re committed to investing in stocks, keep these points in mind as you make your choices and reap your rewards. 

There are many things or factors to consider at all times, but as a beginner: although you must be knowledgeable, you can't know it all from the get go. So, to slowly expand your knowledge, let's review the major important points to consider.

1. You’re not buying a stock; you’re buying a company. 

2. The primary reason you invest in a stock is because the company is making a profit. 

3. If you buy a stock when the company isn’t making a profit, you’re not investing — you’re speculating. - This, as a beginner or without proper guidance may be fatal.

4. A stock (or stocks in general) should never be 100 percent of your assets. 

5. In some cases (such as a severe bear market), stocks aren’t a good investment at all. 

6. A stock’s price is dependent on the company, which in turn is dependent on its environment, which includes its customer base, its industry, the general economy, and the political climate. 

7. Your common sense and logic can be just as important in choosing a good stock as the advice of any investment expert. Always ask for multiple opinions and look at multiple sources of information.

8. Always have well-reasoned answers to questions such as 1.“Why are you investing in stocks?” and 2. “Why are you investing in a particular stock?” 

9. If you have no idea about the prospects of a company (and sometimes even if you think you do), always use stop-loss orders. 

10. Even if your philosophy is to buy and hold for the long term, continue to monitor your stocks and consider selling them if they’re not appreciating or if general economic conditions have changed.

We shall further expand upon the above-mentioned points later on, but for a start, they must seem very self explanatory.

Some Important Terminology to Review and Numbers to Look out for within The Company

  • Debt 

It is extremely important to check whether or not the company is financially afloat, or within a range where it can pull itself back up if something were to happen within the market or financial environment.
The Debt of a company should be no more than half of it's assets or less.

  • Earnings

The company's earnings should be at least 10% higher than the previous term/year. Which shows stability

  • Sales

The company should show an increase in sales over the course of multiple years (better to invest in older companies as a beginner). Or it should at least have more sales than the previous year.

  • Equity

In simple terms, Equity refers to the amount of money that would be returned to the company's owners and shareholders if all assets were liquidated and debts were paid off. This number should increase, and should be greater than the previous year.

You’re thinking of buying stock in a company, but before you invest your hard-earned money in hopes of a profitable return, check out some financial ratios that can help indicate whether the company is on sound financial footing. Here are key measures to consider: 
  1. Price-to-earnings ratio (P/E): For large cap stocks, the ratio should be under 20. For all stocks (including growth, small cap, and speculative issues), it shouldn’t exceed 40. 
  2. Price to sales ratio (PSR): The PSR should be as close to 1 as possible. 
  3. Return on equity (ROE): ROE should be going up by at least 10 percent per year. 
  4. Earnings growth: Earnings should be at least 10 percent higher than the year before. This rate should be maintained over several years. 
  5. Debt to asset ratio: Debt should be half of assets or less.

Some Tips to Protect your Hard Earned Money and to Manage Risks Efficiently

  • Always try to have some extra cash on the side, no matter how tempted you are to be 100 percent fully invested; you never know when buying opportunities may show up. - Not only that, but you always need money for quick and easy access for your day-to-day expenditure, as well as a 1-3 month buffer amount of money in case you find yourself in a detrimental situation (job loss, medical issue, requirement of big-ticket purchases, etc) 
  • Spread your money across several stocks.- Never put all your eggs into one basket, obviously. Buy a variety of different stocks. Also do not just keep yourself limited to just stocks. Buy invest in futures, have some money simply in the bank, invest in crypto, consider property investments, give out loans, and more.
  • Buy more of a down (yet solid) stock. - Do your research, and wait for the stock to go into a bearish market. Once that happens, buy. Buying in an already bull market increases the chances of a further sellout - i.e loss, and decreases the profit margin in certain cases. Be patient.
  • Even if you make what you think is the greatest choice in stock market history and still see the price decline, just wait; common sense takes over regarding a stock price over a protracted period. Long term, good choices go up and bad choices go down.
  • Use stop-loss orders, trailing stop orders, and limit orders. This topic requires a lot of further reading, but it is important to minimize risks.
  • Set up broker triggers. 
  • Consider put options and covered call options. 
  • Sell, if you absolutely must. - Sometimes it's the best option.
  • Trade with your mind, logically and patiently. Not with your emotions, thirst for money, or assumptions.
  • Keep a healthy trade-work-life balance. Since trading requires you to watch the market like a hawk, it is easy to get consumes in the screens before you, and to let it become everything. So preserve your health as a priority over just trading.

Internet Resources for Stock Investing 

With the tools available on the Internet, you have no excuse for not researching any and every potential stock investment. The following list of resources links you to some of the best financial Web sites around. Look at what they have to say about a company or an investment before you take the plunge. 
With all the information given above, follow advice genuinely and educate yourself continuously, and then nothing will be able to stop you from achieving your success in the market. 

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