The word stock is synonymous with the stock markets, trading, brokering and the often confusing terminology that accompanies it. One is often at a loss to explain the meaning of certain financial terms, necessary for any successful attempt at taming the stock market. For investors new to the stock market, knowing what these financial terms imply, can be the fine line between success and failure.
Stocks can be of the following types:
– Warren Buffett
Let’s look at a few stock market terms.
– William Feather
They can be along these lines:
- Profits over time, past present and speculated.
- Sales volume.
- Credit ratings by reliable agencies.
- Current competitors and future probables.
- National and international news
- Economic forecasts
- Scandals or scams
– Warren Buffett
There are several mathematical techniques of stock valuation, let us discuss some of them.
DCF = CF1/(1+r)1 + CF2/(1+r)2 + CF3/(1+r)3 …+ Cfn/(1+r)n
CF1, CF2, CF3 are cash flows in the 3 years under consideration
CFn = cash flow in n number of years
r = internal rate of return
Earnings per Share (EPS) = Net Income − Dividends on Preferred Shares ÷ Number of Common Shares Outstanding
Market Value per Share ÷ Earnings per Share (EPS)
P/E ÷ Annual EPS growth in %
– Donald Trump
- Am I investing from disposable income, or rainy-day savings?
- Do I have additional money to invest if another opportunity arises or am I locked into one stock?
- Should I consider investing in something that has less volatile price movements?
- Is my current portfolio the optimum utilization of my finances?
These introspective questions are necessary to keep you on the right track and focused on market movements. Intelligent investing is about picking solid stocks with earning potential. Let logic and pure technical analysis of a stock guide you.