What You Need to Know About a Stock Before Investing (& Where to Find It)
3 min read
There is a wealth of information on the web about the stock market. How do you know where to begin? First, figure out what to know about a stock before investing. Then, find out where to find it.
Let's get started.
A checklist for what to know about a stock before investing
Is there any news about the stock you should know about? This could be positive or negative.
When does the company's next earnings report come out? An upcoming earnings report could help you determine whether to buy now or wait.
What are professional analysts saying about the stock, and how do they forecast it to perform in the future? Don't just listen to sentiment from retail investors.
Does the stock fit in with your investing strategy (i.e. is it suitable for long-term or short-term growth, and does it help diversify your portfolio)?
Do you know and trust the company? Have they had any hiccups in the past (like Krispy Kreme, who went through an accounting scandal in the early 2000s that almost put them out of business, but are now going public for a second time)?
If the stock is an exchange-traded fund (ETF), what is the expense ratio? The higher the expense ratio, the more you'll pay in fees.
How to learn about stocks when investing by looking in the right places
First in your quest to find more information about a stock before investing: Find an educational blog, daily or weekly newsletter, and market news website you trust.
PRO TIP: Just like you ought to have a diverse investment portfolio, you're better off diversifying your news sources for the most accurate roundup of stock market news and information. Some platforms can be biased one way or the other, so hearing different voices helps drown out the excess noise.
Second, look to charts. As you become a more seasoned investor, stock charts can help you figure out certain indicators.
What's a stock market indicator? A quantitative metric that attempts to interpret stock or financial index data as a way to predict future market moves. There are hundreds of indicators and you may only learn a fraction.
Finally, make friends with the EDGAR search tool on SEC.gov.
EDGAR gives you 20 years worth of corporate filings for publicly traded companies in the U.S. There are different forms for different purposes (e.g. an S-1 is a registration statement with loads of information for private companies going public). You'll also learn more about these forms over time, including what to look for when reading the documents.
PRO TIP: Figure out the most important parts of these corporate filings. They tend to be very long, but you don't have to read all 100+ pages. Zoom in on the important stuff, like the prospectus and revenue table.
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