When you have already decided to venture into the stock market, the main objective for an investor is to select the right stock to play with. Well, there is always ambiguity when entering into a new venture. The financial market is a huge market and consists of numerous options for consideration. But a novice might get confused while making the right decision among the various investment vehicles available. This, sometimes, results in the investors making unwise investments and in turn, they subsequently turn away from the stock market altogether.
Let us look at the different types of stocks one can choose from.
Types of Stocks
The stocks can be mainly divided into:
- Common Stocks: As the name suggests, this type of stocks are quite common. It is the basic stock a corporation issues. Buying a common stock will give you an advantage of owning the equity in the company. It has varied dividends/ or returns. Not only this, as one of the shareholders in the company, you have your say in voting for the board members as well.
- Preferred Stocks: These stocks are usually a hybrid between Common stock and bond. These stocks represent some degree of ownership in a company but usually don’t come with the same voting rights. Each share of preferred stock is normally paid a guaranteed dividend which receives first priority over common stock holders in the event of liquidation. Preferred shareholders always receive their dividends first and, in the event the company goes bankrupt, preferred shareholders are paid off before the common stockholders.
The Preferred Stocks are further sub-divided into 4 categories:
- Cumulative Preferred Stocks: This is more of a savings stock. In the case of cumulative stocks, if for some reason the dividends cannot be paid out one year, it is added to the dividends the following year and paid out in one larger amount.
- Non-cumulative Preferred Stocks: In this case, the dividends skipped one year are not added to the following years’ dividends.
- Callable/ Participating Preferred Stocks: These shares may receive higher than normal dividend payments if the company turns a larger than expected profit.
- Convertible Preferred Stocks: This type gives you (stockholder) the right to convert your stocks into a fixed number of common stocks irrespective of market price.
Well, I know that after getting equipped with so much information about the stock market, as a starter, you might want to jump into this bandwagon of the stock market and play with it. But wait; first know the criteria for the right selection of stocks and that will certainly enable play a defensive shot as a starter.
Ok, let us talk about the objectives determining the selection of stocks for an investor.
- How to maximize the total return on investment (e.g. appreciation plus any dividends received).
- Selection of a stock that can limit risks.
- How to maintain an appropriate degree of portfolio diversification.
You can also broaden your knowledge through the various newspaper articles, internet shows, and magazines etc. that have the analyst’s views of the stock market. Well, no analyst can be 100% correct all the time, however if there is a consensus among analysts that is a good sign.
Make sure you examine the company closely before investing. Now what is it that you need to look for in a company:
- The income statement
- The balance sheet
- The cash flow statement
The steps in buying a stock involve two steps:
- Analyzing stock: When one watches a game of football or cricket, it is easy to comment on the winning or losing team, but only an analyst can find out the reason behind the failure of the losing team and the strategies applied by the winning team to take a lead in the game. And if you start with a little bit of analysis before finalizing on the plan you want to invest in, it can certainly load you with confidence and allow you a good start.
- Momentum Tracking: It is always important to keep pace with the market momentum and venturing into and shifting between the right stocks which can earn to better profits on a timely basis.
To simplify the selection process, many investors choose stocks based solely on performance. But there are other factors which also need an investor’s attention & these are:
- Portfolio fit – You should focus on companies which enhance your portfolio and also attends to your investment objectives, risk threshold, and time management criteria.
- Investment Management Process – While investing one should concentrate more on the companies which has a track-record of a clear history showcases a disciplined investment process and is more or less successful in delivering the anticipated investing benefits.
- Performance – From the above discussion it is clear that one needs to pay attention to the past performance of the company, the investor wants to delve into. This is to ensure consistent returns with minimal risk.
Evaluating the financial market behavior via analytical skills becomes an integral characteristic for an investor and helps ascertain the market behaviour.
Equity Analysis: A) Fundamental Analysis, and B) Technical Analysis.
Key to Fundamental analysis of stocks
The fundamental information that is analyzed can include company’s financial reports, and non-financial information such as estimates of the growth of demand for products sold by the company, industry comparisons, and economy – wide changes, changes in government policies etc..
Key to Technical analysis of stocks
Technical analysis is solely based on a company’s valuation through its price movement in the market. It delves into the study of supply and demand of the product in the market in order to find the trajectory of its future deviation.
Much said and done about stocks, their types and valuation, it is the investor who is solely responsible for the right choice of their stocks/ plan and earns benefits after thorough consideration.
FTSE Russell to include 11 stocks from China’s STAR Market in global benchmarks
SHANGHAI (Reuters) – Index provider FTSE Russell will add 11 stocks from China’s STAR Market to its global benchmarks, according to a post on its website from Friday.
The move marks the first time shares from Shanghai’s Nasdaq-style STAR Market for stocks in China have been included in a global index.
The 11 stocks include Raytron Technology Co Ltd, Zhejiang HangKe Technology Co Ltd, Montage Technology Co Ltd, Advanced Micro-Fabrication Equipment Inc China.
(Reporting by Josh Horwitz and Samuel Shen in Shanghai; Editing by William Mallard)
UK insurers estimate to pay up to 2.5 billion pounds for coronavirus claims
(Reuters) – The Association of British Insurers (ABI) said on Saturday insurers are likely to pay up to 2.5 billion pounds ($3.50 billion) for UK’s COVID-19 insurance claims incurred in 2020.
The latest estimates include 2 billion pounds for COVID-19 business interruption claims and 500 million pounds for COVID-19 related protection insurance claims, travel insurance claims and other general insurance products.
ABI’s Director General Huw Evans said in a release that the pandemic illustrated some uncomfortable gaps between what people expected to be covered for and what their policy was designed for.
“We need to learn lessons from this unprecedented event and redouble our efforts to improve consumers’ trust in insurance products,” he added.
The insurance trade body said 123,000 claims have been settled with payment so far and a further 9,000 have received partial payments as of mid-January 2021.
($1 = 0.7139 pounds)
(Reporting by Maria Ponnezhath in Bengaluru; Editing by Marguerita Choy)
Oil extends losses as Texas prepares to ramp up output after freeze
By Devika Krishna Kumar
NEW YORK (Reuters) – Oil prices fell for a second day on Friday, retreating further from recent highs, as Texas energy companies began preparations to restart oil and gas fields shuttered by freezing weather and power outages.
Brent crude futures ended the session down $1.02, or 1.6%, at $62.91 a barrel while U.S. West Texas Intermediate (WTI) crude fell $1.28, or 2.1%, to settle at $59.24.
For the week, Brent gained about 0.5% while WTI fell about 0.7%.
This week, both benchmarks had climbed to the highest in more than a year.
“Price pullback thus far appears corrective and is slight within the context of this month’s major upside price acceleration,” said Jim Ritterbusch, president of Ritterbusch and Associates.
Unusually cold weather in Texas and the Plains states curtailed up to 4 million barrels per day (bpd) of crude production and 21 billion cubic feet of natural gas, analysts estimated.
U.S. energy firms this week cut the number of oil rigs operating for the first time since November, according to Baker Hughes data.
Texas refiners halted about a fifth of the nation’s oil processing amid power outages and severe cold.
Companies were expected to prepare for production restarts on Friday as electric power and water services slowly resume, sources said.
“While much of the selling relates to a gradual resumption of power in the Gulf coast region ahead of a significant temperature warmup, the magnitude of this week’s loss of supply may require further discounting given much uncertainty regarding the extent and possible duration of lost output,” Ritterbusch said.
Oil prices fell despite a surprise drop in U.S. crude stockpiles last week, before the big freeze hit. Inventories fell 7.3 million barrels to 461.8 million barrels, their lowest since March, the Energy Information Administration reported on Thursday. [EIA/S]
“Vaccines and the impressive rollouts we’ve seen have delivered strong gains, as have the efforts of OPEC+ – Saudi Arabia, in particular – and the big freeze in Texas, which gave oil prices one final kick this week,” Craig Erlam, senior market analyst at OANDA, said.
“With so many bullish factors now priced in, it seems we’re seeing some of these positions being unwound.”
The United States on Thursday said it was ready to talk to Iran about returning to a 2015 agreement that aimed to prevent Tehran from acquiring nuclear weapons. Still, analysts did not expect near-term reversal of sanctions on Iran that were imposed by the previous U.S. administration.
“This breakthrough increases the probability that we may see Iran returning to the oil market soon, although there is much to be discussed and a new deal will not be a carbon-copy of the 2015 nuclear deal,” said StoneX analyst Kevin Solomon.
(Additional reporting by Ahmad Ghaddar in London and Roslan Khasawneh in Singapore and Sonali Paul in Melbourne; Editing by Marguerita Choy, David Gregorio and Nick Macfie)
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Bitcoin and ethereum prices ‘seem high,’ says Musk
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Sunak to raise business tax to pay for COVID-19 support – The Sunday Times
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FTSE Russell to include 11 stocks from China’s STAR Market in global benchmarks
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Bitcoin, ether hit fresh highs
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