Learning to Evalutate Stock Market Risks

The stock market is a hectic place filled with investors both professional and amateur. It can be a very difficult task to choose a stock, CD, mutual fund ect. to invest in. The first decision you must decide is to know if you are in a company for the long term or short term. You could be in long term for several reasons, fundamentals, management, and products. You can also be short for several reasons, momentum, hype, and news. After you have that decision made you must decide how much capital you are going to risk in the investment. Me personally, I only put forth what I can afford to lose. Evaluation can be a very hard thing to do. This can be done either by looking at SEC filings, technical chart analysis and a variance of other things. When choosing stocks, I like to take a look at the company as a whole, what the company is doing, what they are working on, how they have done in the past. I take a look at how much cash they have on hand, followed by if they are in any debt, or obtaining financing and seeing if the financing is toxic or non toxic. When I am long term in a stock, I usually don’t worry about it to much. I take a look at the product, the target market of the product, how they are promoting or how the product is selling, and I do the exact same for a service. Then I will check how the stock price is doing every few weeks. I don’t like to check it out everyday, in this case you believe the company will do well, and looking at the stock price everyday may cause you to panic. That is one thing you may not want to do if you are vested long in a certain company. Just make sure to contact the company to see how they are doing, and if operations are still going well you don’t need to worry. Evaluating a risk can be done very easily, check to see if the company has any outstanding liabilities, check how much cash they have, debt, and how there product is doing. Make sure the target market is still there and the sector in which the stock is in is still bullish as a whole. Always do your own due diligence before investing in a company and make decisions based on yours and yours only. Do not follow others as they could be wrong and this makes it much worse. Always keep up to date with terminology, and remember one can never be to good, always hone your skills.