Mark Hauser is among the co-managing partner at Hauser Private Equity. In an influential post from Investopedia, he highlights timely guidelines for new stock investors.
Stock market investment is far more complex than a cakewalk, so you’ll need to tread carefully and arm yourself with the right information before plunking down your hard-earned cash.
How the Stock Market Works
Mark Hauser explains the mechanics of the stock market. Once you understand that, It’ll equip you to invest in a stock and protect yourself from potential losses. It will also help you determine which type of stock market investments will be best for you. Stocks are shares of a company. You receive a stake in the firm’s assets and profits, and you share in the risk for that company’s performance. However, the profit potential is much greater than alternatives like bonds or bank accounts.
Each company has different types of stock with different rights to dividends or voting power. Depending on your goals with investing, it helps to consider which type of stock you want as an investor.
Perform Detailed Market Analysis
After deciding which type of stock to purchase, Hauser urges you to perform a detailed market analysis to understand the company’s fundamentals and identify any risks or hidden issues.
In the real world, it’s not always easy to determine whether an investment is positive or negative. One way to know is by determining if the company has a strong balance sheet and cash flow.
Balance sheets provide a snapshot of a firm’s financial health, while cash flow shows how much money is coming in and going out. If either one looks weak, there’s usually cause for concern. Hauser recommends you perform fundamental analysis to ensure you’re investing in a strong company.
The last thing you want is to start an investment without knowing whether the company will be able to pay dividends or return money to shareholders. Mark Hauser advises you to weigh the risk of an investment with its potential reward before you put your money on the line.