A stock, which can also be called equity, is the ownership of a part of a business establishment. A person who owns a stock is entitled to a part of the establishment’s assets and profits based on how much stock the person owns.
Investing in stocks is quite a lucrative move. This is as a result of the compound interest you earn on them when you own the stocks for the long term. Your assets increase in value and the amount of money in your account grows steadily. With that increase, the subsequent profit you earn will be higher than the last.
This sounds easy enough but many people do not earn well from stocks. This might be because they go about it wrongly, buying and selling at the wrong times. The baseline formula for stocks is to buy low and sell high.
How does Luminablog come into the picture? They provide you with tips on equity trading; things to consider when buying and selling stocks. Also, there are British business advisory services you can use if you’re based in the UK.
Here are ways for you to know when to buy and sell stocks.
- The Stock Market Can’t Be Tamed
Some people believe they can work out a pattern for the stock market but this is not true. The market is unpredictable. If you try to time the market, you might end up making unwise decisions that could reduce your profit.
- Buy Stocks When the Price is Below its Intrinsic Value
When you perceive that the stock is worth more than what it is being sold for, buy it because the value will appreciate eventually, thus giving you an upside in profit.
- Buy Stocks That Pay a Constant Dividend
Such stocks are called dividend-paying stocks. Whether the market is favourable or not, the investors receive an average amount equal to the shares they own.
- Buy Stocks from the Right Places
You can either use a direct stock purchase plan, full-service stockbrokers, or discount stockbrokers. Each option has its advantages over the others. Decide which will be suitable for you.
- Research Before You Buy Stocks
Study the growth rate of a company before you buy from them. How do their revenues and dividends increase? Also, consider how competitive the company is. A good bet would be a company that is innovative and inimitable.
- When the Share Performance of Your Stock Reduces, Sell it
For a stock to drop in earnings regularly, it is a sign that it is losing its market share. If this continues, it could result in a loss in value.
- Sell When Shares Reach the Limited Cap
Some might be tempted to let it linger for a while. But depending on your target, it could exceed as much as it could recede. If the latter is the case, which is quite possible, given the volatile nature of the market, you might end up not reaching your financial goals.
When share prices are going up and the volume is reducing, that’s a sign to sell. If the prices are going down and the volume is increasing, you should also sell as this means more people are dropping their shares.