Different types of stock require different investing strategies. These 3 stock investing tips will help you to figure out which stock investing strategy suit your needs.
Stock Investing Tips #1: Income Stocks
Income stocks is about getting consistent income from the company. Normally, investors will get paid in the form of dividends. Although the dividend will be taxed, it helps investors to generate consistent passive income out of the stocks they bought.
Why the company give dividends?
Why don’t they use the cash for themselves?
A company will decide to distribute the excess cash as a dividend when its business operation does not require so much money to grow. This can be either due to limited growth opportunities or the company is able to borrow cash from borrowings instead of reinvesting its earnings. And by giving out the excess cash as dividends, the company is able to maintain very high return on equity too.
The investing strategy would be buying the stocks when they are undervalued, or known as value investing.
Stock Investing Tips #2: Growth Stocks
Growth stocks are hot; as hot as iPhone or iPod in fact. They are so hot due to its ability to double, triple or even quadruple investors’ initial investment in just in few years! However, hunting growth stocks is a challenging quest.
It is not easy to discover the next Microsoft.
If you do, it needs time to grow.
But here are some tips for you. Look for stocks that have great Earnings Per Share Growth Rate (EPSGR), consistently growing sales and followed by operating cash flow as well as its profit margins. By having that kind of stocks, you are certain that the stock is growing healthily.
You can play momentum investing game with this stock.
Stock Investing Tips #3: Speculative Stocks
Speculative stock is high risk high return investment game plan. It is about making 100% returns in no time or losing them altogether! The return potential can be very good because it normally deals with penny stocks. In the same time, the risk is too high since nobody knows if the speculation takes place.
Speculators are normally seasoned traders.
But the victims are mostly beginners.
Thus, if you are new to stock market investing, avoid these types of stocks first. Yes, they can make you rich but you went broke if you are not using the right strategies.
You might find fundamental and technical useful to trade these stocks, and don’t forget to place stop loss order. Otherwise, your losing streak won’t stop!