One share of stock usually represents a very small portion of ownership in a company, but with that ownership comes the right to cast your vote on issues at the annual meeting. Sound intimidating? It shouldn't be.
By looking at the basic measures of a company, like sales and earnings growth, profit margin, and a few other financial measures, you can judge the prospects of a company and be able to estimate a value for the stock in the future.
Using the shared knowledge and tools available to you with BetterInvesting, you can get to the bottom of studying stocks and learning how to make the right choices for your own portfolio.
Growth or Value?
The first step in becoming a successful investor in stock is to understand the language of the market. And the first terms you may encounter in any discussion of the market may well be "growth stocks" and "value stocks".
Growth Stocks have sales and earnings growth rates that outperform the economy and inflation. Growth investors buy these stocks because they believe the stock will increase in value as the earnings increase.
Value Stocks are stocks that appear to be on sale compared to their fair value. Value investors make their money when the market realizes that the stock is worth more than the market price.
In other words, growth investors pay a dollar for a stock that will be worth two dollars in the future, whereas value investors pay a dollar for stock that no one else realizes is worth two dollars today.
The BetterInvesting philosophy sounds a bit like a combination of these two investment plans: invest in quality growth companies that are selling at reasonable prices. And the great news is that BetterInvesting has the tools to help you get your share!
- The Stock Check List—your the beginners guide to investing in stocks. Just look up a few numbers, make some very easy calculations, dig up a little dirt on the company business and you're ready to decide whether the company is a prospect for purchase.
- The Stock Selection Guide (SSG)—the foundation of BetterInvesting stock analysis. The SSG offers the tools to create a realistic portrait and detailed analysis of an investment. From growth of sales and earnings per share, to PE ratios and five-year potential, the SSG can be your best friend when looking to invest.
- The Stock Comparison Guide (SCG)—view stocks side-by-side for up to 30 criteria from your completed SSGs. With all the information in one place you can compare the criteria you consider most important before choosing which stock is the better investment for you or your club.
