Share dealing is the pastime of choice for those who dream of a millionaire’s retirement. Most of those who give it a go are aiming to discover the next embryonic Apple, in the hopes that they can cash in on its exponential rise to brilliance and buy themselves the future that they’ve always yearned for.
The likelihood of this actually happening is lower than you’d like to think, and the truth is that it takes a lot of hard work to turn a profit. Making an Investment in shares is not a simple game of luck; rather, it is one where you must tirelessly endeavour to stack the odds in your favour.
To help you do that, here are a few basic strategies for achieving your end…
#1: Study the Ratios of Each Individual Share
One of the most common mistakes amongst novice traders is to look at profits growth at the exclusion of everything else, but these figures alone are not capable of painting the whole picture. Instead, you need to study their ratios as well, the most important of these being price to earnings (P/E). Working the P/E out is simple, and all that you need to do is divide the share price by the earnings per share. Where the market expects the most growth, you will find the highest P/E ratios, and these are the assets that you should be considering.
#2: Choose Between Small, Medium, and Large Companies
The different types of companies all have divergent characteristics, and these will suit individual investors to varying degrees. This means that it’s really important to know the major disparities between them.
The largest companies on the market, like those featuring in the FTSE 100, will already be mature businesses, and this means that you’re unlikely to see any dramatic growth trajectory. Although dividend yields will be high, P/E ratios will be low. They are often a good choice for those starting out thanks to their stability, and make a fantastic base for a novice portfolio.
Medium-sized companies will also be well established, but you will often find that they have a stronger growth story and higher P/E. Although they pose a slightly increased risk, they are certainly worth considering when you choose your investments.
The highest risk options tend to be smaller companies, and they are something of a double-edged sword for those looking to turn a profit. Although they are more likely to deliver significant gains if they manage to make a success of themselves, they’re also more likely to go bust, meaning that you could lose everything that you’ve invested in them.
Do your research and decide which ones are the best option for you, and you’ll be off to the perfect start.
#3: Know Where to Look
Thirdly and finally, it’s really important to do your research. Although many people start off as accidental investors, thanks to a tip from a friend or acquaintance, you cannot rely on such sources forever, and you’ll soon find that you need to start securing your own information. Luckily, there are a limitless number of resources available to help you, so it’s simply a matter of locating them. The tips that stockbrokers feature on their websites are one useful starting point, as are the articles penned by newspaper pundits. You may also find it handy to follow the lead of funds managers and see where they’re entrusting their livelihood, and if so trustnet.co.uk could be a great place to begin.
Get off to the right start today with these three simple strategies, and watch your share dealing transform into your very own success story.