Many of our clients are young individuals that would consider themselves fairly educated investors. But being educated on the stock market or on the bond market simply isn’t enough to ensure that your current and future investments give you the return that you are seeking. Not only must you be constantly aware of what is going on in the markets, but you need also to be conscious of what time of investments you should be making during each period of your life. When gambling in a risky market such as the stock market, individuals investing for themselves need to know the basic analytics necessary to achieve success. It is also crucial to know how you should be balancing your accounts, and how to properly manage them.
When analyzing stocks to purchase there are about a million different factors that need to be considered, and every stock analyst will go on to tell you their personal opinion on which statistics are best to consider before making a purchase. The truth in the matter is that at the end of the day the stock market is just legal gambling that is truly unpredictable. Yes, there are ways to possibly see what the future of companies will hold when examining some stocks, but if you don’t spend the majority of each day educating yourself on the markets, you probably won’t have an idea on what the future holds for most companies.
A few key elements to analyze when making a stock portfolio are the Beta, dividends paid, and the company’s earnings. The beta provides you with an idea of how that particular stock will be affected with a change in the economy and stock market as a whole. A proper stock portfolio built for success should have stocks with a wide range of betas. This can ensure protection over your account if there is ever another stock market crash. It can also provide you with protection while the stock market is progressively moving forward at a solid rate. Dividends are definitely something to be considered when making a stock purchase. Either companies can choose to pay out dividends to their shareholders or they can dump that money back into the operation to try to improve their business.
Many people like dividends when purchasing stocks for the short-term. We all know that stocks are meant to be a long-term investment, but many people still try to profit off of them in the short-term. Personally, I do not invest in many companies that pay large dividends to their shareholders because I’d prefer them to use that money to grow their business and drive their stock price as high as possible. Don’t get me wrong, money now is always better than money later, but when trying to optimize a long-term investment I’d rather be patient and watch the company’s success go through the roof in a few years than make an extra five dollars per stock each year right now.