It is quite difficult to select stocks how should one go about selecting cheap stocks that have a growth potential when he is a beginner, what parameters should be kept in mind while selecting since there are more than 5000 companies
Since you are a beginner, I personally recommend you to read this before you blindly trust anyone regarding selecting a stock. Especially the cheap stocks you are looking for.
Can filter by using fundamentals or technicals as a start. Read varsity here to understand the nuances of fundamentals and technicals and to get good grip on markets.
Use tickertape to filter companies based on fundamentals
Try Streak to filter based on technicals.
The best advise I can give you has been said before, countless times:
Understand accounting, you need to know what your reading, all of the charts in the world are valueless unless you understand them.
Stick to fundamentals and value add over a long period of time.
You’re being part of a company, thats the mindset you need to develop.
FYI: Every great investor has said everything I’v just said.
I think the biggest issue any trader face these days is selecting a stock that can give them profit. The first and foremost thing you need is proper knowledge and research before spending even a penny. There are many strategies to select best stocks for intraday trading and learning has no end. So I suggest you to take regular course, webinars, blogs, books specifically made for Day trading.
Here are some quick tips to help you :-
- Decide your risk level. Everyone has a extent to take risk so decide when you will stop trading
- Do some homework and develop a strategy
- Start by picking one stock and then analyze the results. You may use tools like StockEdge to research about the stock performance and analyse it.
- Use trading charts to understand movement of stocks and the overall market.
- Avoid emotional connect and be ready for loss. This is most important quality of a trader
I am listing down few factors which can help you choose the best stock to buy for your stock market investment:
Future Growth Potential
One way to consider stocks while choosing the best stock to buy is to look at companies with huge growth potential in future. As you might be aware of the future of automobile industry is going to be electric. So companies which manufacture battery packs, a core component in electric vehicles are likely to have huge demand in future.
Relative strength in industry
How well the company is placed in the industry as compared to its competitors can help you decide whether it can be considered as the best stock to buy. The best example of this is Coal India which has over 75% market share in the industry where it is operates.
Low or zero debt means the company has enough funds for expansion or regular dividend payout. On the contrary high debt will restrict the company’s expansion plans as a significant portion of earnings will be used for paying off the interest.
The P/E ratio denotes how well a stock’s price is doing relative to the company’s earnings and helps to compare companies in the same industry or sector. It is an important factor to consider when using fundamental analysis.
Management of the company
A well-managed company with a visionary management has the potential to grow many times with time. A management which serious about the business will use its excess cash flow wisely for further expansion or reward the shareholders by paying dividends. The most important thing is transparency. It reveals the real intention of the management and how serious they are about talking the business to the next level.
Considering the current market situation I am sure you must be hesitant about investing in the stock market I am sure you know how overhyped the news are, these days. But if you want to become a successful investor, you can safely ignore the stock market news and stick to fundamental analysis-based investing. Currently I am reading lots of informative content on Research & Ranking blog page. You can click here to visit their knowledge corner.