Investing in equities means you are buying a share of the company. Investing in equities will give you high returns than any other investment, as this investment is one of the most earning investments which make you rich in a shorter time period as compared to other investments. Apart from this, the risk involved investing in equities is also parallel or equally high. Higher the risk involved higher the returns you will earn. All you need to have patience, as investing in equities will give you high returns if you are planning it for long-term. Here we will tell you the factors which you have to evaluate before purchasing any share.
Before making any investment in equities you have to do research, learn the basics, and get knowledge about how to select the company. If you are focusing on the individual security then you have to evaluate the valuation of the security using these factors:
- Evaluate the 5-year or 1-year performance of the company where you are looking to invest.
- Check your budget and the investment which you can afford to buy shares.
- Evaluate the price/earnings ratios of the selected company.
- Check the EPS of the company which you can check by applying the formula that is (earning per share = (Net income- Dividends on share)/ average outstanding share.
- Check the dividend of the company which they offer after purchasing the shares, as dividend gives you the quality of the shares and represent the good financial health of the company.
- See the prices of the company by checking it on the graph as on what price you are willing to purchase the share to get more return.
- Calculate the return on equity of the company and the compound annual growth rate of the company.
Like fundamental analysis, technical analysis is also very important where you are checking and analyzing the financial performance of the company. This is the analysis where you are forecasting the price movements of the company. You can perform this analysis, using the graphs and the statistics present in various websites which show the price movement of the shares taking into consideration of the time. You can select the time frame according to your wish it can be 1-min, 5-min, hourly, daily, weekly, monthly, and yearly.
News plays the vital role in investments. Hence before purchasing any of the shares always check the news on the daily basis. The news is the best source which will help you taking the right decision.