Making Your Own Investment Decisions
Topics: investments, investment decisions
Most people have a broker that makes all of their investment decisions for them. They rarely even look at their portfolio to see what it contains, and they review their account statements only once per year, because their goal is for their account to grow in the long run.
However, you should not rely on your broker to do everything for you, because most stockbrokers have many clients, and do not pay close enough attention to your account to make the small trades here or there that can really help you maximize your return, or get out of a stock that is weighing down your portfolio so that money can be transferred into something else that would be more remunerative. Simply put, your broker or financial advisor does not make the necessary short-term investment decisions to maximize the performance of your account. You need to become familiar with each stock you have in your portfolio so that you can make decisions on your own in the short-term, while still relying upon your financial advisor to structure your portfolio with a mix of the right instruments (stocks, bonds, money market, etc.) to help you make money in the long run.
To make your own investment decisions, you need to review the most recent balance sheet and income statement for the company, as well as some other important statistics. You can access these reports online on any stock quoting website. Simply enter the ticker symbol for the company you want to evaluate, and then there should be a link to their income statement and balance sheet on that page.
When looking at the balance sheet, compare the assets for the current reporting period to the previous period. Did the assets, such as revenue from sales, increase or decrease? Check the liabilities from the previous period as well. And, you should check whether shareholder equity has increased or decreased. This is important to you as an investor because shareholder equity is the true worth of a company to its shareholders. If the balance sheet does not have shareholder equity listed, simply subtract the total liabilities from the total assets to arrive at the number.
When looking at the income statement, you should look at the earnings figures. The earnings figures are listed at the bottom of the income statement. Have earnings increased or decreased since the previous income statement was issued? If there is a decrease, what is the reason? Is it because the company is struggling, or is it because of some non-recurring expense they had to pay that will not affect their earnings in the future? Earnings are important to you as an investor because a portion of this money is paid out to the shareholders in the form of a dividend.
Next, there are a few statistics that you should evaluate which are also listed on the profile for the company when you look them up online. The two most important statistics to look at are the P/E ratio and the PEG ratio. Typically, you can find these numbers under the statistics section for the company.
The P/E ratio is the price-to-earnings ratio. It is calculated by dividing the price for one share of stock by the earnings per share. Most companies have a P/E ratio between 15 to 25. Some companies trade at P/E ratios as high as 70 or higher, such as Google. If a P/E ratio is very high, the stock might be overvalued, meaning it could come down in price in the future. But, a high P/E ratio often means that the company is expected to grow its sales and earnings significantly in the future, so investors are willing to pay more than the stock is currently worth because the price will be justified in the long run, and the company will be able to pay larger dividends when its earnings increase.
A low P/E ratio could mean that a company is undervalued, meaning that the stock price will likely go up in the future. However, a low P/E ratio could mean that investors are abandoning the stock because future sales and earnings are expected to decrease. When evaluating the P/E ratio, you need to assess the overall situation and future sales expectations in order to properly interpret what the P/E means for you as an investor.
The other important statistic, perhaps more important than the P/E ratio, is the PEG ratio. The PEG is the price-to-earnings growth ratio. It is calculated by dividing the P/E ratio by the annual earnings growth per share. This ratio helps you to ascertain whether the company is growing its earnings enough each year to justify the current price of the stock. If a company is not growing its earnings at all, then the stock will not go up. If the earnings are growing significantly each year, then the price of the stock will rise accordingly. Since earnings growth is the real impetus behind an increase in the price of a stock, the PEG is probably the best tool for evaluating whether the stock has hit the wall or will continue to increase. If the PEG is less than 1, the stock will likely continue to go up. If the PEG is much higher than 1, then the stock might go down. However, a high PEG could mean that a company is expected to grow tremendously in the months and years a
head.
I hope this information will help you make your own investment decisions. Try to set aside some time to review each stock that you have in your portfolio, and then use the procedures outlined in this article to examine the value of the stock. This will help you grow your investments much more in the long run than if you rely solely on your broker or financial advisor to do all the work for you.
Jim Pretin is the owner of www.forms4free.com, a service that helps programmers make email forms.
Previous Articles Highlighter:
Tips So Taxi Driver Accounts Do Not Have To Be Taxing (1)
The Revenue naturally adopt a strict view on taxi expenses claimed for partner work as it is an area some people might use to reduce the tax liability. Care is required to justify the partner as an expense.
Call Capture Marketing - 3 Tips For Success (2)
Next, take advantage of the call forwarding feature that should be included with your system. I have heard of some agents letting people go to voicemail so they can call them back or including their cell phone number in their recording and asking the person to call them there.
The Stock Replacement Covered Call Strategy (3)
The December 47.5 call was trading at $11.45 or $.05 over parity. By purchasing this option, you would be equivalently buying the stock at $58.95 (the strike price plus the option price).
Investment Property Mortgage Loan Basics (4)
Your first step is securing an investment property mortgage loan. If you decide to try this kind of venture, you need to know the basics first. Visit KISCL to see how their real estate products can help.
Top Self Employed Tax Questions That Save Money (5)
Interest on loans and overdrafts can be claimed as business expenses excluding the capital element of repayments. Higher business expense levels accurately recorded can keep taxable profit below the higher tax rate.
Finding And Securing A Commercial Loan Quickly & Easily (6)
Having a backdoor connection to access wholesale interest rates is key. Commercial loan broker's that can access databases of investors and lending institutions that offer base wholesale rates with minimal "life of the loan" profit are able to pass the savings to the client.
Reasons To Refinance Now (7)
Get Cash in Hand: If you already have equity built up in your home, then you can refinance for a larger amount than you currently owe and take that additional amount out in cash.
Great Tips For Investing In Bonds (8)
This does not follow, because the general reputation of the company, coupled with its over-all financial standing, is of the utmost importance. Bond selection is best made with the aid of the rating, as given by one of the investment services, and with the assistance of a broker or investment counsel.
Financial Education Needed 'More Than Ever' (9)
If such guidance on finance was implemented into the national curriculum, it could well be possible that more Britons will be able to manage personal loan payments in later life.
'Understanding' Is Key To Avoiding Financial Problems (10)
Further research from the debt consultancy, conducted in conjunction with YouGov, also showed that 15 per cent of Britons owe at least 15,000 pounds. Such sentiments concerning financial planning were recently echoed by Chris Tapp.
Homeowners 'Urged To Prepare For Winter' (11)
Crucially, homeowners planning to rely on their home insurance to fund any repairs to their house should be warned that they might not receive the payout they were expecting. Legal & General states that, while such policies may cover homes for damage ensuing from a burst pipe or poor conditions taking their toll on the roof, there is an obligation for owners to keep their home in a reasonable state of repair.
One Of The Best Galveston County Neighborhoods (12)
This clubhouse is planned to sit right at the edge of the marina for Edgewater, and will feature a pool for the enjoyment of those not out on the lake.
The Basic Facts About Secured And Unsecured Loans (13)
This is especially desirable if you unfortunately have a bad history of credit, since the approval is not solely based on your rating, but on the value of your collateral.
Sugar Land Subdivisions Promotes Growth (14)
CNN/Money and Money Magazine ranked this area third in the list of the 100 best cities to live in the U.S. in its 2006 ranking. When you bring together outstanding home builders, exemplary Fort Bend schools, century-old trees and tons of recreational amenities, you've got Sienna Plantation.
The Best Cheap Car Insurance Quotes - Trade Secrets (15)
Compare features and get quotes from several other companies. If you haven't had any accidents that were your fault, have a good driving record and you're a good driver, then consider getting a higher deductible so you would pay out a larger sum of money in the event you have an accident that is your fault but save now on your insurance premium.
When Credit Card Balance Transfer Is For You (16)
Make sure that their interest rates are much lower compared to your old card issuer - it's possible to get 1% to 2% interest if you take your time negotiating and researching for a reputable company.
Choosing The Best Credit Card For The Purpose (17)
Some may lure you with teaser offers of low rates for a certain period, whereas the regular rates can get as high as 40 percent. Since there are no fixed regulations concerning interest rates and penalties on late payments, some issuers forfeit the teaser rates if the borrower does not make the payment on time, and replaces it with a penalty interest rate.
When Remortgage Is Essential For Your Home (18)
Topics: Remortgage Bad Credit, Remortgage Deals, Bad Credit Remortgage It may be tempting to go in for a remortgage when your friends are doing it, but make sure you think about all the options first.
Debt Reduction Is The Best Way To Being Debt-Free (19)
This mode of debt reduction tends to be especially useful when the aim is reducing debt pertaining to credit cards and the like. In order to get your debt out of your way, first make a list of all your dues in ascending order from the smallest balance to the largest (notice that the order is not based on interest rate, but on the due amount).
Insurance Is Investment For The Future (20)
But the primary reason is concern for the future. An older man who married late would need to be sure that his young children will have something to live off when he dies.
Newer Articles Highlighter:
Different Mortgage Types Match Your Finance Needs (1)
One part is used to pay the interest on the principle (or original amount you borrowed), and the other goes into an ISA plan, which is invested. Part of the ISA plan will be simple savings, and the rest will go into stocks and other investments.
What Is Your Investment Risk Tolerance? (2)
Finally, for those of you who are extremely risk averse, you need to compose a portfolio that consists of mostly high-yield government bonds and certain money market instruments that pay a decent interest rate.
What Is Umbrella Insurance? (3)
More often than not, people are sued and have no extra protection to block the plaintiff from going after their personal assets in the lawsuit. To protect yourself from such a quandary, you need to have umbrella insurance.
The Benefits Of Life Insurance (4)
You can also stipulate the percentage of the proceeds that each beneficiary is to receive. Most people list their wife as the sole beneficiary while the kids are still young, and then as the kids get older, they modify their policy to include their children for a certain percentage of the death benefit.
Are Bonds Really Risk Free? (5)
At each meeting, the Fed renders a decision regarding interest rates. If inflation has been increasing, the Fed will need to raise interest rates. If inflation is moderate or contained, the Fed will likely maintain the current interest rate level.
Bad Credit Increases Insurance Cost (6)
Here are some tips on how to do that. Pay your bills on time. Late payments show up on your credit report and they stay there for seven years.
What Is A Zero Percent Auto Loan? (7)
Also make sure that your loan payments are within your budget. Court helps people to learn about private student loans. You can read more of his work by visiting: whalehookloans.com.
How To Use A One Time Credit Card (8)
You may hear them called controlled payment cards or perhaps called virtual account credit cards. Regardless of what they are called what they do is protect the security of your regular cards.
Best New Places To Live In Texas - The Master-Planned Community (9)
Another indication that the place you choose to live is a master-planned community is the sheer number of conveniences and amenities and the enormous size of the features encompassed in the community.
How To Use A Business Credit Card (10)
Business credit cards can also be useful because of the various perks and programs that they sometimes offer. Personal credit cards also carry several programs but these are most often designed for vacations or consumer type discounts.
Modified Internal Rate Of Return For Larger Profits (11)
As a savvy investor, you should be aware of the concept. Any real estate firm can have many different property investment opportunities at any given time. The firm will have to do commercial property analysis for each opportunity to determine which ones are worth their funds, and which ones constitute financial drains or losses.
How To Profit From Mobile Park Homes (12)
The property will actually sell for a higher price even if the tenants are not paying more in rent because the park itself has increased in value and will have a higher income potential.
Getting Adequate Financial Advice Is 'Vital' (13)
While it is good to get a steer from friends or family as to where to go for financial advice, their financial needs may have been very different." In taking the time to search for sufficient help on money matters, many consumers may find themselves in a more capable position to meet various demands on their spending and be able to select a cheap loan with greater ease.
How Do You Prevent Being Scammed On A Auto Loan (14)
If they are not willing to do that for you, then you should not be willing to purchase the warranty. Court helps people decide whether debt consolidation loans are the right move.
Consumers Under 'Needless' Financial Pressure (15)
In turn such money could help borrowers not only pay off credit card debts but also make repayments on utility bills, carry out home improvements or service secured personal loan costs.
Residential Investment Property Loans - Crunching Numbers (16)
Actually, there are some key differences with investment property loans that make them a little bit trickier than you would expect. When you took out your loan for your house, it was quite a whopper.
Real Estate For Sale - Find Your Agent (17)
First, it may affect the agent fee you pay. Second, it may limit the houses you are shown. It's best to ask about such a policy and decide what's best for you.
Millions Of Homeowners To 'Suffer' Financially (18)
And should such people face a rise in payments, they could well develop problems in meeting other demands on their finances such as loans and utility bills. The news comes in the wake of the recent credit crunch and sub-prime crisis which has seen a number of loan lenders increase their rates of interest and implement stricter borrowing criteria.
Lessening The Credit Crunch For Consumers (19)
legislative bodies are taking to mitigate the mortgage crisis. 1) Interest Rate Cuts - Option traders are anticipating the feds to cut to interest rates by 0.25% this month and expect another 0.5% reduction over the next 6 months.
Residential Investment Properties As Alternative Income (20)
Committing to the responsibilities of a rental is the first step towards getting that lucrative real estate site. The next major step is getting financed. Most people looking to invest in a rental property don't have the ready cash for a down payment.