Effective Research Tips That Will Help You Make The Right Stock Trading Decisions

The coronavirus pandemic arrived in 2020 with no warning and has changed our lives forever. Many people have been furloughed from their jobs, or worse, have been made redundant, shops and non-essential services have closed, and we can no longer socialize with our friends and family for the risk of spreading the evil virus.

This has meant that we are all spending more time than ever in our homes, often with far more time on our hands and with less money in our pockets.

Many people are using this opportunity to explore new ways of making money, and one way is by turning to the stock market. However, this can be a dangerous place for novices as it is very easy to lose money quickly if you don’t know what you are doing.

In this article, we are going to take a look at some effective research tips that will help you to make the right stock trading decisions, so read on to find out more. 

How long do you want to invest?

The type of stock that you will choose to invest in will depend on the time that you want to invest for. If you are young, you may take a view that your investments are for the long term, so then you can afford to choose riskier stocks, but in years to come may increase in value exponentially. Conversely, if you are looking to invest for shorter periods, or to draw income through dividends, then you will be looking for more stable stocks as you will want to know that your investment is safe. So, before you start investing, you need to decide whether it is for the short or long term, as this will dictate the sort of stock that you invest in. 

What sector do you want to invest in?

There are many different sectors of the economy, and accordingly, there are stocks in each sector that you can invest in. It goes without saying that you should only invest in stocks that you understand, and also that you have a deep knowledge of their particular sector. Maybe you worked for an oil company so you will have more experience in this sector and you will have a better idea of how the market will play out. On the other hand, consumer retail may not be your field, so it would make sense to avoid this sector until you have researched it to the point that you are comfortable taking risks and investing your money. 

Understand the financials

All publicly-traded companies must produce financial reports, so it is crucial that you have a deep understanding of the financials otherwise you will have nothing to base your investment decisions on. All Jason Bond picks will have been selected with the underlying financials in mind because these will tell you whether a company is in rude health or whether it is at rock bottom and should be avoided. So, if you want to make money from the market like professionals, you have to behave like a professional and base your investment decisions on the fundamentals.

Analyze the competitors

It is important that you take a look at the competitors of your chosen stock because they can tell you about the state of that particular sector, and they may also help you change your mind, as you may come across an unexpected undervalued stock, or conversely, you may realize that this isn’t the sector for you. If your chosen stock is the only one in the sector making money, then you must ask yourself why. 

Read analysts’ tips

It is never a sensible idea to blindly follow the advice given by analysts, however, it is important to read what they say. In fact, you should follow several different respected analysts as this will give you an insight as to which stocks are on their radar. If several different analysts all tout the same stock, then it might be worth investigating further. Similarly, you may like the idea of one particular stock when every expert says to stay well away, so use them to back up your research, and then you will be less likely to make mistakes.

As we have learned, it is important to know your strategy before diving into the stock market. Work out how long you want to invest and what your risk profile is. Choose sectors that you have the most knowledge about and make sure that you understand the financials. Always analyze competitors in your chosen sector and read analysts’ tips as they may confirm your decision to invest in a particular stock, or they may dissuade you from doing so. Good luck with your investing!