(6) Analyze Qualitative Factors
It is one of the most important steps to build a well-balanced stock portfolio. Every company is run by one or more promoters. These are usually the persons that are fully responsible for the management of day-to-day activities of a company.
You can get long term sustainable return from a stock only if its promoters are of above average quality or at least average quality. You can’t gain better returns from a stock with dishonest & poor quality promoters.
Some of the qualitative factors to be considered when analyzing a stock include expertise & experience of management, various courses of industry cycles, and strength of a company’s research & development incentives as well as company’s relationship with its employees.
However, promoters are humans and due to human nature can migrate from one group to another over time. Thus, you should be ready to review the latest happenings of the company from time-to-time.
[Read Also: 16 Tricky Ways To Identify & Pick Multibagger Stocks]
(7) Compare Key Financials Of Every Stock With Its Competitors
It is one of the best steps to build a well-balanced stock portfolio. Financial statements of a company are the blue-prints of its performance.
Investors can analyze a given company through these financial statements such as income statement, balance sheet, cash flow statements & many more. You can also analyze a company through its financial ratios.
Some of the most valuable financial ratios include Price-to-Earning ratio, Price-to-Sales ratio, Price-to-Book Value ratio, Return-on-Equity, & many more.
These financial ratios are often available from various reputed financial sites. However, you should never forget to check only the latest financial ratios to evaluate a company.
It is because only the most recent financial ratios can help you to compare the position & working style of a company with its competitors.
Thus, investors can selectively choose only the best stocks with valuable ratios.
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