Investing is trick because of the many factors that can affect the outcome of an investment. Superstart stocks can turn south in the blink of an eye, and terrible stocks can top the charts without notice.
There are ways to navigate the market that help you build wealth through great trades and timely sells, and they all come down to watching specific aspects of the markets.
To help you find those trading securities, we put together 4 areas you have to monitor when you plan to invest.
1 – Stock Trends and Dividends
Forgive me for putting these together and not giving you 5, but they really do go hand in hand. Paying attention to the history of a stock, the overall growth of a company’s revenue and history of their dividend payouts, you can find the right opportunities. If you take these numbers into account when you are looking to invest, you can find amazing growth opportunities in new thriving markets. The goal is to make money on your investments, and doing by the numbers is proven way to start strong.
When you are comparing these numbers, make sure you use the investment ratios to compare them on a finite level. Using the Purchase/Earnings ratio, you can gather insights on the current payout ratios for dividends. Using the PEG ratio you can see and predict the potential for that dividend to grow.
2 – Initial Investment
You need to pay attention to how much the buy-in for a stock option is. Even if the return is really high, the initial investment could take quite a bit of time to earn back. You have to spend money to make money, but you should try to be making money on that investment within the first 5 years, that is, only if the potential after that 5 years is astronomical or extremely steady. It should get you money before that.
Keep in mind that there are buy-in minimums sometimes. That means a really great investment might cost you a few grand to get started with.
3 – Inflation
Inflation is a good thing. Inflation is a bad thing.
Both of these statements can be true depending on where the inflation numbers are. Typically, the target is a 2% inflation rate. At this rate, prices can raise to level demand in a profitable way, and that’s a good thing. A favorable inflation rate means higher profit margins without losing buying numbers.
The problem comes with the fluctuation in the marketplace for the supply and demand for a product or service. A major fluctuation in either could result in an inflation rate that is either way too high for the general income to meet, or an oversupply and super sales that result in tanking businesses.
Take the housing market crash in 2008. Banks were making major loans to housing and infrastructure, but the market couldn’t meet the financial standards of the developed houses. The result was an oversupply of houses that couldn’t be sold and prices that continued to skyrocket. Inflation rose due to the overwhelming debt the banks couldn’t hope to pay back, and the market came tumbling down. The result was stricter controls on federal lending from the FED and more correlation driven interest rates were imposed.
4 – GDP and the FED
The Gross Domestic Product directly affects the rate at which the FED will lend, so they don’t end up back in 2008. When the GDP is good, the rates from the FED will be low. That means companies and use investments and loans at a higher potential because the bar to repay it isn’t as high. Working capital can create growth when used properly, and growth is good for the economy.
The opposite is true too. When the GDP is not doing so good, it means the economy isn’t spending money. In result, it’s harder for businesses to make profits, so the FED increases rates because the market is showing signs of it not being a good time to lend. The reason being, it will take longer to get the money back in an economy that isn’t spending money.
There are many major securities that can affect the performance of your investment, and that is why the stock market seems to always be shifting. Up and down is normal, but you want to make sure the market is reflecting similar growth to your investment option. This is especially true if the market is going good, and should be a bit of a relief when it’s not.
Keep in mind that there are factors beyonds these, such as world disasters and taxes, that can also affect the performance of your investment.
What do you look for to secure to your investment opportunities? Do you pay attention to any special market signs for security? Share your investing tips in the comments below.
Author: Oliver Curtis
Hi there. I’m Oliver. I’m just a young boy from the outskirts of… Okay, that’s a lie, I’m not a young boy anymore, although I certainly feel that way at heart.