7 Keys That You Need to Know About Stocks Before You Invest

By Easwar Koovappadi

Understand these 7 keys about stocks before you invest.
1. The market is now divided into two camps - big losers ( Banks etc, due to the housing and subprime crisis) and the big winners (resources specifically petroleum due to supplies being anticipated to be lower than demand in the medium term
2. Identify the industry that is a loser today but will provide handsome returns over the long run. The winners of today may not continue at the same rate. The big losers of today such as the banks have a low P/E and when the economy turns around , will provide handsome returns
3. The key to success in building a long term successful portfolio is find a combination of investments that over time will help you reach your financial goals and not an arbitrary collection of stocks that you bought because your office colleague bought it.
4. Learn what numbers mean to increase your investing success. Financial statements by itself may not be an indicator of how profitable a business would be in the long term
5. Diversify amount broad categories to build an unsinkable portfolio, in sectors such as Oil and Gas, Manufacturing, Consumer products. Resources, Finance, Utilities and Telecommunications.
6. Never buy stocks with a low P/E without research on why it could be a bargain?
7. Never give in to the temptation of forgoing research and depend on heresy, coffee machine chat.. Always look for companies that pay dividends. Time and again research has proved that dividend paying companies weather the business cycle storms more effectively. Always research before you put in your hard-earned money in an investment. There are several resources that offer knowledge that can help you get the skill set to become a successful investor. Look for companies that are significant in its industry and that has demonstrated year over year growth in sales and profit.
Easwar has an extensive knowledge of issues related to stocks, currency,exchange,taxes,cost savings ideas and loves to write about it. For additional resources please visit his blog http://investforgreatreturns.com
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