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At a Glance
When selecting a stock to invest in, you need to first consider the following:
- What is your investment goal?
Generally there are two broad goals to consider.
- Growth investing – Investing in companies with a high level of sustained earnings growth.
- Value investing – Investing in companies whose stock is trading at less than what its actual worth should be.
- How much risk are you prepared to take?
The larger the stock price movement, the higher the investment risk. As such, can you afford to risk losing part or all of your money invested in the stock?
- How long do you want to remain invested?
The span of time to remain invested will determine whether you should be focused on taking advantage of short-term price movements, or wait for stock prices to increase with growth of the overall market over a longer period of time.
The above will then lead you to better identify the types of stocks to invest in:
|Investment goal||Stability |
Relatively consistent in growth and more resistant to economic instabilities
|Steady income |
Stable dividend payments and possibly capital appreciation gains
|Capital appreciation |
Stock value to possibly grow at an above-average rate as compared with peers or overall market
|Risk||More established companies are more stable but could also generate relatively slower growth and lower returns||Dividend payment may not be made, and interest rate fluctuations can affect dividend earnings||Stock price may be susceptible to a fair bit of fluctuation|
|Investment period||Beyond a year due to their stability||Up to 12 months or more if seeking stable, recurring income||Up to 12 months|
|Trading strategy||Passive trading (buy-and-hold)||Active trading|
Investing in Your First Stock
|Identify a list of stocks based on your investment goal, risk appetite and investment period. Adopt technical and/or fundamental analysis in your investment decisions.|
|Once you have decided on the stock(s), you can monitor their performance and price with an appropriate trading strategy.|
|Buy your stock(s) and execute your trading strategy. Monitor and revise your stocks investment along the way and ensure it is in line with your investment goal and risk appetite.|
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